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EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
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DATED AS OF APRIL 13, 1998
BETWEEN
▇▇▇▇▇▇▇ INVESTMENTS, INC.
AND
HOME INTERIORS & GIFTS, INC.
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TABLE OF CONTENTS
PAGE
ARTICLE I THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.01. The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.02. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.03. Effective Time of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.04. Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.05. Articles of Incorporation; Bylaws; Purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.06. Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.07. Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS . . . . . . . . . . . . . . . . . 3
2.01. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.02. Effect on Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.03. Company Common Stock Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.04. Proration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.05. Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.01. Organization of the Company; Equity
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.02. The Company's Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.03. Authority, No Conflict, Required Filings
and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.04. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.05. No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.06. Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.07. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.08. Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.09. Agreements, Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.10. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.11. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.12. Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.13. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.14. Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.15. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.16. Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.17. Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.18. Customers, Suppliers and Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.19. Potential Conflicts of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.20. Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.21. Proxy Statement; Offering Memorandum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.22. Board Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.23. Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.24. Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.25. Information Supplied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF CII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.01. Organization of CII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(i)
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4.02. CII's Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.03. Subsidiaries; Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.04. Authority; No-Conflict; Required Filings
and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.05. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.06. Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE V CONDUCT OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.01. Covenants of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.02. Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.03. Conversion of ESOP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE VI ADDITIONAL AGREEMENTS AND COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.01. No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.02. Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.03. Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.04. Shareholders Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.05. Legal Conditions to Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.06. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.07. Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.08. Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.09. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.10. Protected Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.11. Additional Agreements; Reasonable Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.12. Disclosure Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.13. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.14. Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.15. Shareholders Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.16. Employment and Consulting Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.17. Stock Option Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.18. Copyright Assignment and License Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.19. Personal Property Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.20. Company Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.21. Environmental Investigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.22. Certain Agreements with HMC Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
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ARTICLE VII CONDITIONS TO MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.01. Conditions to Each Party's Obligation To
Effect the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.02. Additional Conditions to Obligations of CII . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.03. Additional Conditions to Obligations of
the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE VIII TERMINATION AND AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.01. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.02. Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.03. Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.04. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.05. Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE IX MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.01. Investigations; Nonsurvival of Representations
and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.02. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.03. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.04. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.05. Entire Agreement; No Third Party
Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.06. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.07. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.08. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.09. Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.10. Withholding Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
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Exhibit A ....... Parties to Execute Voting Agreement
Exhibit B ....... Voting Agreement
Exhibit C ....... Amended and Restated Articles of Incorporation
Exhibit D ....... Amended and Restated Bylaws
Exhibit E ....... Shareholders Agreement
Exhibit F ....... Employment Agreement
Exhibit G ....... Consulting Agreement
Exhibit H ....... Employee Stock Option Plan
Exhibit I ....... Manager Stock Option Trust Terms
Exhibit J ....... Copyright Assignment
Exhibit K ....... License Agreement
Exhibit L ....... Personal Property Lease
Exhibit M ....... Form of Opinion of Gardere & ▇▇▇▇▇, L.L.P.
Exhibit N ....... Form of Opinion of Weil, Gotshal & ▇▇▇▇▇▇, LLP
Exhibit O ....... Financial Advisory Agreement
Exhibit P ....... Monitoring and Oversight Agreement
Schedule 1.06.... List of Directors
Schedule 1.07.... List of Officers
Schedule 2 ...... Management Shareholders
Schedule 6.10 ... Protected Employees
Schedule 6.15 ... Parties to Execute Shareholders Agreement
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of April
13, 1998, is by and between ▇▇▇▇▇▇▇ Investments, Inc., a Texas corporation
("CII"), and Home Interiors & Gifts, Inc., a Texas corporation (the "Company").
W I T N E S S E T H :
WHEREAS, the respective Boards of Directors of the Company and CII
(collectively, the "Constituent Corporations") have determined that the merger
of CII with and into the Company (the "Merger"), upon the terms and subject to
the conditions set forth in this Agreement, would be advisable and in the best
interests of their respective companies and their respective shareholders, and
such Boards of Directors have approved such Merger, pursuant to which (i) each
share of common stock, $0.10 par value, of the Company (the "Company Common
Stock") issued and outstanding immediately prior to the Effective Time (as
hereinafter defined)other than (a) shares of Company Common Stock owned,
directly or indirectly, by the Company or any Subsidiary (as defined in Section
3.02(c)) of the Company and (b) Dissenting Shares (as hereinafter defined)
shall be converted into either (1) the right to retain at the election of the
holder thereof and subject to the terms hereof, Company Common Stock or (2) the
right to receive cash and (ii) each share of common stock, $.01 par value, of
CII ("CII Common Stock")issued and outstanding immediately prior to the
Effective Time shall be converted into shares of Company Common Stock;
WHEREAS, the Merger and this Agreement require the affirmative vote of
holders of two-thirds of the outstanding shares of Company Common Stock for the
approval thereof;
WHEREAS, CII is unwilling to enter into this Agreement unless (a)
contemporaneously with the execution and delivery of this Agreement, the
individuals and entities set forth on Exhibit A shall each enter into a Voting
Agreement with CII in the form of Exhibit B (the "Voting Agreement"), (b) the
shareholders of the Company listed on Schedule 2 agree to retain the shares of
Company Common Stock described therein and (c) the individuals set forth in
Section 6.16 enter into employment and consulting agreements as required by
Section 6.16 hereof;
WHEREAS, CII and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger; and
WHEREAS, it is intended that the Merger be recorded as a
recapitalization for financial reporting purposes;
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NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
ARTICLE I
THE MERGER
1.01. The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Texas Business Corporation
Act (the "TBCA"), CII shall be merged with and into the Company at the
Effective Time. At the Effective Time, the separate existence of CII shall
cease, and the Company shall continue as the surviving corporation (sometimes
referred to below as the "Surviving Corporation").
1.02. Closing. Unless this Agreement shall have been terminated and
the transactions herein contemplated shall have been abandoned pursuant to
Article VIII, the closing of the Merger (the "Closing") will take place at
10:00 a.m., Dallas, Texas time, on June 5, 1998 (the "Closing Date"), at the
offices of Gardere & ▇▇▇▇▇, L.L.P., 3000 Thanksgiving Tower, ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, unless another date, time or place is agreed to in writing
by the parties hereto or except as otherwise provided in Section 8.01(b)
1.03. Effective Time of the Merger. As soon as practicable on or
after the Closing Date, the parties shall file with the Secretary of State of
the State of Texas articles of merger (the "Articles of Merger") executed in
accordance with the relevant provisions of the TBCA and shall make all other
filings or recordings required under the TBCA. The Merger shall become
effective at such time as the Articles of Merger are duly filed with the
Secretary of State of the State of Texas, or at such other time as is
permissible in accordance with the TBCA and as CII and the Company shall agree
shall be specified in the Articles of Merger (the time the Merger becomes
effective being the "Effective Time").
1.04. Effects of the Merger. The Merger shall have the effects set
forth in the applicable provisions of the TBCA.
1.05. Articles of Incorporation; Bylaws; Purposes.
(a) Articles of Incorporation. At the Effective Time, and
without any further action on the part of the Company or CII, the Articles of
Incorporation of the Company shall be the Articles of Incorporation of the
Company following the Merger; provided that the Articles of Incorporation of
the Company shall be amended and restated in the form attached as Exhibit C.
(b) Bylaws. At the Effective Time, and without any
further action on the part of the Company or CII, the Bylaws of the
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Company shall be the Bylaws of the Company following the Merger until
thereafter changed or amended as provided therein or by applicable law;
provided that the Bylaws of the Company shall be amended and restated in the
form attached as Exhibit D.
1.06. Directors. The persons set forth on Schedule 1.06 shall be the
directors of the Company following the Merger, until the earlier of their
resignation or removal or until their respective successors are duly elected
and qualified, as the case may be.
1.07. Officers. The officers of CII at the Effective Time, who shall
be those persons set forth on Schedule 1.07, shall be the officers of the
Company following the Merger, until the earlier of their resignation or removal
or until their respective successors are duly elected or appointed and
qualified, as the case may be.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS
2.01. Defined Terms. As used in this Article II, the following terms
shall have the following meanings:
(a) "Aggregate Non-Management Non-Cash Election Shares"
shall mean and be equal to 3,046,330 Non- Cash Election Shares.
(b) "Cash Election Price" shall mean $18.05451 per share.
(c) "Cashing Out Share" shall mean each share of Company
Common Stock immediately prior to the Effective Time other than Electing Shares
and Dissenting Shares.
(d) "CII Post-Merger Shares" shall mean the number of
shares of Company Common Stock owned by CII immediately after the Effective
Time which shall be equal to the product of (i) 15,231,652 times (ii) a
quotient (A) the numerator of which is the Total Post-Merger Equity minus the
Retained Equity and (B) the denominator of which is the Total Post-Merger
Equity.
(e) "Dissenting Shares" shall mean shares of Company
Common Stock issued and outstanding immediately prior to the Effective Time
held by a shareholder of the Company who has the right to demand payment for
and appraisal of such shares in accordance with the applicable provisions of
the TBCA, and who has demanded properly in writing appraisal for such shares in
accordance with Section 5.12 of the TBCA and has not withdrawn such demand or
otherwise forfeited his appraisal rights.
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(f) "Electing Share" shall mean each Pro Rata Electing
Share and each Excess Electing Share.
(g) "Election Date" shall mean 5:00 p.m., Dallas, Texas
time, on May 26, 1998.
(h) "ESOP" shall mean the Company's Employee Stock
Ownership Plan and Trust.
(i) "Excess Electing Share" shall mean, as to any holder
of Company Common Stock, other than the individuals listed in Schedule 2, who
effectively makes, and does not withdraw or revoke, an election to retain
Company Common Stock after the Effective Time in accordance with Section 2.03,
and subject to Section 2.04, each share of Company Common Stock owned by such
holder prior to the Effective Time which such holder has elected to retain in
excess of such holder's Pro Rata Share pursuant to clause (2) of Section
2.03(b)(ii)(B).
(j) "Exchange Agent" shall mean Securities Transfer
Corporation.
(k) "Management Share" shall mean each share of Company
Common Stock owned by the individuals listed in Section A of Schedule 2 which
is to be converted immediately after the Effective Time into a Post-Merger
Management Share pursuant to Section 2.02(c)(ii).
(l) "Non-Cash Election Share" shall mean each share of
Company Common Stock owned immediately after the Effective Time by a
shareholder of the Company pursuant to an election to retain Company Common
Stock which was effectively made and not revoked pursuant to Section 2.03.
(m) "Post-Merger Management Share" shall mean each share
of Company Common Stock owned by the individuals listed in Section A of
Schedule 2 immediately after the Effective Time.
(n) "Pro-Rata Electing Share" shall mean, as to any
holder of Company Common Stock who effectively makes, and does not withdraw or
revoke, an election to retain Company Common Stock after the Effective Time in
accordance with Section 2.03, each share of Company Common Stock owned by such
holder prior to the Effective Time which shall be converted into a Non-Cash
Election Share pursuant to clause (1) of Section 2.03(b)(ii)(B) in a number
equal to such holder's Pro Rata Share.
(o) "Pro Rata Share" shall mean (i) in the case of each
shareholder of the Company other than the ESOP and the individuals listed in
Schedule 2, a number of Non-Cash Election Shares equal to (A) the Aggregate
Non- Management Non-Cash Election Shares times (B) a quotient, (1) the
numerator of which is the number of shares of Company Common Stock owned by
such shareholder immediately prior to the Effective Time and (2) the
denominator of
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which is the number of shares of Company Common Stock owned by all such
shareholders immediately prior to the Effective Time and (ii) in the case of
each individual listed in Section B of Schedule 2, a number of Non-Cash
Election Shares specified in his Election Form (as hereinafter defined) up to
but not to exceed the number listed in Section B of Schedule 2.
(p) "Retained Equity" shall mean an amount equal to the
product of (i) $18.05451 times (ii) the number of Post-Merger Management Shares
and Non-Cash Election Shares.
(q) "Total Post-Merger Equity" shall mean $275,000,000.
2.02. Effect on Capital Stock. As of the Effective Time, by virtue
of the Merger and without any action on the part of the Company, CII or any
holder of any shares of Company Common Stock or CII Common Stock:
(a) CII Common Stock. Each share of CII Common Stock
issued and outstanding immediately prior to the Effective Time shall be
converted into a number of shares of Company Common Stock following the Merger
equal to the quotient of (i) the number of CII Post-Merger Shares divided by
(ii) the number of shares of CII Common Stock outstanding immediately prior to
the Effective Time.
(b) Cancellation of Treasury Stock. Each share of Company
Common Stock that is owned by the Company or by any Subsidiary of the Company
shall be canceled and retired and shall cease to exist, and no cash, Company
Common Stock or other consideration shall be delivered or deliverable in
exchange therefor.
(c) Conversion (or Retention) of Company Common Stock.
Except as otherwise provided herein, each issued and outstanding share of
Company Common Stock (other than shares canceled pursuant to Section 2.02(b)
and Dissenting Shares) shall be converted into the following (the "Merger
Consideration"):
(i) for each Electing Share, the right to retain
one fully paid and nonassessable Non-Cash Election Share;
(ii) for each Management Share, one fully paid and
nonassessable Post-Merger Management Share; and
(iii) for each Cashing Out Share (other than
Management Shares), the right to receive the Cash Election Price in cash from
the Company following the Merger.
(d) Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, Dissenting Shares shall not be converted into a
right to receive the Merger Consideration or any cash in lieu of fractional
Non-Cash Election Shares pursuant to Section
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2.05(e)(but shall have the appraisal rights set forth in such provisions of the
TBCA). If, after the Effective Time, such holder fails to perfect or has
withdrawn or otherwise loses any such appraisal right, each such share of
Company Common Stock owned by such holder shall be converted into the right to
receive, without any interest thereon, the Cash Election Price in accordance
with Section 2.02(c)(iii) upon surrender in accordance with Section 2.05 of the
certificate or certificates that formerly evidenced such shares. The Company
shall give prompt notice to CII of any demands received by the Company for
appraisal of shares of Company Common Stock and CII shall have the right to
participate in and approve all negotiations and proceedings with respect to
such demands. The Company shall not, except with the prior written consent of
CII, make any payment with respect to, or settle or offer to settle, any such
demands.
(e) Cancellation and Retirement of Company Common Stock.
As of the Effective Time, all shares of Company Common Stock (other than
Electing Shares, Management Shares and Dissenting Shares) issued and
outstanding immediately prior to the Effective Time shall no longer be
outstanding and automatically shall be canceled and retired and shall cease to
exist, and each holder of a certificate representing any such shares of Company
Common Stock shall, to the extent such certificate represents such shares,
cease to have any rights with respect thereto, except the right to receive the
Cash Election Price in consideration therefor upon surrender of such
certificate in accordance with Section 2.05.
2.03. Company Common Stock Elections.
(a) Non-Cash Election. Except as otherwise provided in
Section 2.03(b), each person who, on or prior to the Election Date, is a record
holder of shares of Company Common Stock will be entitled to make an
unconditional election (a "Non-Cash Election") on or prior to the Election Date
to retain Non-Cash Election Shares, on the basis hereinafter set forth.
(b) Elections.
(i) The Company shall prepare a form of election,
which form shall be subject to the reasonable approval of CII (the "Election
Form"), to be mailed by the Company with the Proxy Statement(as hereinafter
defined) to the record holders (except as hereinafter set forth) of Company
Common Stock as of the record date for the Company Shareholders' Meeting (as
hereinafter defined). The Election Form shall be used by each record holder of
shares of Company Common Stock who desires and is permitted hereunder to make a
Non-Cash Election. In addition, the Election Form must be completed and
returned by each record holder of shares of Company Common Stock (regardless of
whether or not such holder is making a Non-Cash Election) in order for such
holder to receive such holder's Merger Consideration. Notwithstanding anything
to the contrary contained herein, the Trustee of the ESOP shall not be
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afforded the opportunity to make a Non-Cash Election with respect to the shares
of Company Common Stock held by the ESOP. In addition, without completion and
delivery of an Election Form, as of the Effective Time each Management Share
shall be converted into the right to retain one fully paid and non-assessable
Post-Merger Management Share and each share of Company Common Stock other than
a Management Share owned by the individuals listed in Section A of Schedule 2
shall be converted into the Cash Election Price, all as provided in Section
2.02(c)(ii) and Schedule 2. Each Holder of Management Shares shall deliver to
the Company or the Exchange Agent, as appropriate, such documents, instruments
and certifications as may reasonably be requested in order to effect the
conversion of such Management Shares into the Merger Consideration as provided
herein.
(ii) Each holder of Company Common Stock receiving
an Election Form shall be entitled to make an election to receive or retain, as
the case may be: (A) the Cash Election Price for each of his Cashing Out Shares
or (B) the Cash Election Price for each of his Cashing Out Shares plus a number
of Non-Cash Election Shares equal to the number of (1) Pro Rata Electing Shares
held by such holder plus (2) Excess Electing Shares, if any, held by such
holder; provided that the number of Non-Cash Election Shares to be received
pursuant to clause (2) shall not exceed in any event the number of shares
specified in such holder's Election Form and shall be subject to reduction in
accordance with Section 2.04 hereof.
(iii) Any election to retain Non-Cash Election
Shares shall have been properly made only if the Company or, if the Company so
determines, the Exchange Agent shall have received by the Election Date, an
Election Form properly completed and signed and accompanied by certificates
representing the shares of Company Common Stock to which such Election Form
relates, duly endorsed in blank or otherwise in form acceptable for transfer on
the books of the Company.
(c) Revoking Election Forms. Any Election Form may be
revoked by the shareholder of the Company submitting it only by written notice
received by the Company or, if the Company so determines, the Exchange Agent
prior to 5:00 p.m, Dallas, Texas time on the Election Date. In addition, all
Election Forms shall automatically be revoked if CII or the Company terminate
this Agreement or CII and the Company notify the Exchange Agent in writing that
the Merger has been abandoned. If the Merger is abandoned, the certificate or
certificates for the shares of Company Common Stock to which such Election Form
relates shall be promptly returned to the shareholder submitting the same.
(d) Exchange Agent Determinations. The determination of
the Company or, if the Company so determines, the Exchange Agent shall be
binding as to whether or not Non-Cash Elections have been properly made or
revoked pursuant to this Section 2.03 and when Non-Cash Elections or
revocations of Non-Cash Elections were
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received. If the Company or, if the Company so determines, the Exchange Agent
reasonably determines in good faith that any permitted Non-Cash Election was
not timely and properly made, the shares of Company Common Stock relating
thereto (other than Dissenting Shares) shall be treated as Cashing Out Shares.
The Company or, if the Company so determines, Exchange Agent shall also make
all computations as to the allocation and the proration contemplated by Section
2.04, and any such computation shall be conclusive and binding on the
shareholders of the Company.
2.04. Proration.
(a) Aggregate Non-Cash Election Shares. Notwithstanding
anything in this Agreement to the contrary, all shareholders of the Company
other than those individuals listed in Schedule 2 shall not own in the
aggregate Non-Cash Election Shares in excess of the Aggregate Non-Management
Non-Cash Election Shares.
(b) Right to Exceed Pro Rata Share. If less than all of
the shareholders of the Company (other than those individuals listed in Section
B of Schedule 2) who are permitted to make a Non-Cash Election pursuant to
Section 2.03(b) make a Non-Cash Election, then each shareholder of the Company
(other than those individuals listed in Section B of Schedule 2) who has
elected to retain Non-Cash Election Shares in excess of his Pro Rata Share
pursuant to clause (2) of Section 2.03(b)(ii)(B) shall be entitled to retain an
additional number of Non-Cash Election Shares in excess of his Pro-Rata Share
(which together with his Pro Rata Share shall not exceed the maximum number of
Non-Cash Election Shares specified on his Election Form) equal to (i) the total
number of Non-Cash Election Shares to which the shareholders of the Company
(other than those individuals listed in Section B of Schedule 2) who did not
elect to retain their Pro Rata Share were entitled, multiplied by (ii) a
fraction (A) the numerator of which equals the total number of shares of
Company Common Stock owned immediately prior to the Effective Time by him and
(B) the denominator of which equals the total number of shares of Company
Common Stock owned immediately prior to the Effective Time by all shareholders
of the Company (other than those individuals listed in Section B of Schedule 2)
electing to retain Non-Cash Election Shares in excess of their Pro Rata Share.
If any shareholder of the Company (other than those individuals listed in
Section B of Schedule 2) who elects to retain Non-Cash Election Shares in
excess of his Pro Rata Share specifies on his Election Form a maximum number of
additional Non-Cash Election Shares which is less than the total number of
additional Non-Cash Election Shares to which he is entitled pursuant to the
immediately preceding sentence, the other shareholders (other than those
individuals listed in Section B of Schedule 2) electing to retain Non-Cash
Election Shares in excess of their Pro Rata Share shall be entitled to retain
the Non-Cash Election Shares to which such shareholder was entitled on a pro
rata basis computed in a manner consistent with the immediately preceding
sentence.
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2.05. Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, the Company
shall deposit with the Exchange Agent, for the benefit of the holders of shares
of Company Common Stock (other than the Company, CII, any Subsidiary of the
Company or holders of Dissenting Shares), for exchange in accordance with this
Article II, the cash portion of the Merger Consideration, plus an amount equal
to that required to pay in full the amount required by Section 2.05(e). In
addition, if and to the extent Election Forms and stock certificates have been
delivered to the Company pursuant to Section 2.03(b)(iii) or otherwise, the
Company shall deposit the same with the Exchange Agent. To the extent that less
than all of the Election Forms and stock certificates have been delivered to
the Company prior to the Effective Time pursuant to Section 2.03(b)(iii) or
otherwise, the Company shall, from time to time after the Effective Time,
deposit with the Exchange Agent, for the benefit of the holders who delivered
such Election Forms and stock certificates after the Effective Time, such stock
certificates for exchange in accordance with this Article II.
(b) Exchange Procedures. After the Effective Time and the
surrender to the Company of certificate or certificates which immediately prior
to the Effective Time evidenced outstanding shares of Company Common Stock,
together with a duly executed Election Form and such other customary documents
as may be required, and acceptance thereof by the Company, the holder of such
certificate or certificates shall be entitled to a certificate or certificates
representing the number of full Non-Cash Election Shares or Post-Merger
Management Shares, if any, to be retained by the holder thereof pursuant to
this Agreement and the Cash Election Price into which each Cashing Out Share
previously represented by such certificate or certificates surrendered shall
have been converted pursuant to this Agreement (together with cash in lieu of
fractional Non-Cash Election Shares or Post-Merger Management Shares). The
Company shall accept such certificates upon compliance with such reasonable
terms and conditions as it and the Exchange Agent may impose to effect an
orderly exchange thereof in accordance with normal exchange practices. After
the Effective Time, there shall be no further transfer on the records of the
Company or its transfer agent of certificates representing, in whole or in
part, Cashing Out Shares, and if such certificates are presented to the Company
for transfer, together with a duly executed Election Form and such other
customary documents as may be required, they shall be canceled against delivery
of the Cash Election Price. If any certificate for Non-Cash Election Shares or
Post-Merger Management Shares is to be issued in, or if cash is to be remitted
to, a name other than that in which the certificate for Company Common Stock
surrendered for exchange is registered, it shall be a condition of such
exchange that the certificate so surrendered shall be properly endorsed or
otherwise in proper form for transfer (with the signatures thereon guaranteed),
and that the person requesting such exchange shall pay to the Company or its
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transfer agent any transfer or other taxes required by reason of the issuance
of certificates for such Non-Cash Election Shares or Post-Merger Management
Shares in a name other than that of the registered holder of the certificate
surrendered, or establish to the satisfaction of the Company or its transfer
agent that such tax has been paid or is not applicable. Until surrendered in
exchange for the Merger Consideration, each certificate for shares of Company
Common Stock shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender the Merger Consideration as
contemplated by Section 2.02. No interest will be paid or will accrue on any
cash payable as Merger Consideration or in lieu of any fractional Non-Cash
Election Shares or Post-Merger Management Shares.
(c) Distributions With Respect to Non-Cash Election
Shares. No dividends or other distributions with respect to Company Common
Stock with a record date after the Effective Time shall be paid to the holder
of any unsurrendered certificates with respect to the Post-Merger Management
Shares represented thereby, and no cash payment in lieu of fractional shares
shall be paid to any such holder pursuant to Section 2.05(e), until the
surrender of such certificate in accordance with this Article II. Subject to
the effect of applicable laws, following surrender of any such certificate,
there shall be paid to the holder of the certificate representing whole shares
of Non-Cash Election Shares or Post-Merger Management Shares issued in
connection therewith, without interest, (i) as soon as practicable after the
later of the Effective Time or such surrender, the amount of any cash payable
in lieu of a fractional share to which such holder is entitled pursuant to
Section 2.05(e) and the proportionate amount of any dividends or other
distributions with a record date after the Effective Time theretofore paid with
respect to such whole Post-Merger Management Shares, and (ii) at the
appropriate payment date, the proportionate amount of any dividends or other
distributions with a record date after the Effective Time but prior to such
surrender and a payment date subsequent to such surrender payable with respect
to such whole Post-Merger Management Shares.
(d) No Further Ownership Rights in Company Common Stock
Exchanged for Cash. All cash paid upon the surrender for exchange of
certificates representing shares of Company Common Stock in accordance with the
terms of this Article II (including any cash paid pursuant to Section 2.05(e))
shall be deemed to have been paid in full satisfaction of all rights pertaining
to such shares of Company Common Stock.
(e) No Fractional Shares.
(i) No certificates or scrip representing
fractional Non-Cash Election Shares or Post-Merger Management Shares shall be
issued in connection with the Merger, and such fractional share interests will
not entitle the owner thereof to vote or to any other rights of a shareholder
of the Company after the Merger.
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(ii) Notwithstanding any other provision of this
Agreement, each holder of Electing Shares exchanged pursuant to the Merger who
would otherwise have been entitled to receive a fraction of a Non-Cash Election
Share (after taking into account all Non-Cash Election Shares delivered to such
holder) shall receive, in lieu thereof, a cash payment (without interest) equal
to the product of the Cash Election Price multiplied by the fraction of a Non-
Cash Election Share to which such holder would have been entitled to receive
but for this Section 2.05(e).
(f) Termination of Exchange Fund. Any portion of the
Merger Consideration deposited with the Exchange Agent pursuant to this Section
2.05 (the "Exchange Fund") which remains undistributed to the holders of the
certificates representing shares of Company Common Stock for six months after
the Effective Time shall be delivered to the Company, upon demand, and any
holders of shares of Company Common Stock prior to the Merger who have not
theretofore complied with this Article II shall thereafter look only to the
Company and only as general creditors thereof for payment of their claim for
the Cash Election Price, if any, Non-Cash Election Shares or Post-Merger
Management Shares, if any, any cash in lieu of fractional Non-Cash Election
Shares and any dividends or distributions with respect to Non-Cash Election
Shares or Post-Merger Management Shares to which such holders may be entitled.
(g) No Liability. Neither the Company nor the Exchange
Agent shall be liable to any person in respect of any Non-Cash Election Shares
or Post-Merger Management Shares (or dividends or distributions with respect
thereto) or cash from the Exchange Fund delivered to a public official pursuant
to any applicable abandoned property, escheat or similar law. If any
certificates representing shares of Company Common Stock shall not have been
surrendered prior to one year after the Effective Time (or immediately prior to
such earlier date on which any Cash Election Price, Post-Merger Management
Shares, cash in lieu of fractional Non-Cash Election Shares or dividends or
distributions with respect to Non-Cash Election Shares or Post-Merger
Management Shares in respect of such certificate would otherwise escheat to or
become, the property of any Governmental Entity (as hereinafter defined)), any
such cash, Post-Merger Management Shares or dividends or distributions in
respect of such certificate shall, to the extent permitted by applicable law,
become the property of the Company, free and clear of all claims or interest of
any person previously entitled thereto.
(h) Investment of Exchange Fund. The Exchange Agent shall
invest any cash included in the Exchange Fund, as directed by the Company,
provided that such investment shall be (i) securities issued or directly and
fully guaranteed or insured by the United
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States government or any agency or instrumentality thereof having maturities of
not more than six months from the Effective Time, (ii) certificates of deposit,
eurodollar time deposits and bankers' acceptances with maturities not exceeding
six months and overnight bank deposits with any commercial bank, depository
institution or trust company incorporated or doing business under the laws of
the United States of America, any state thereof or the District of Columbia,
provided that such commercial bank, depository institution or trust company
has, at the time of investment, (A) capital and surplus exceeding $250 million
and (B) outstanding short-term debt securities which are rated at least A-1 by
Standard & Poor's Rating Group Division of The ▇▇▇▇▇▇-▇▇▇▇ Companies, Inc. or
at least P-1 by ▇▇▇▇▇'▇ Investors Services, Inc. or carry an equivalent rating
by a nationally recognized rating agency if both of the two named rating
agencies cease to publish ratings of investments, (iii) repurchase obligations
with a term of not more than 30 days for underlying securities of the types
described in clauses (i) and (ii) above entered into with any financial
institution meeting the qualifications specified in clause (ii) above, (iv)
commercial paper having a rating in the highest rating categories from Standard
& Poor's Rating Group Division of The ▇▇▇▇▇▇-▇▇▇▇ Companies, Inc. or ▇▇▇▇▇'▇
Investors Services, Inc. or carrying an equivalent rating by a nationally
recognized rating agency if both of the two named rating agencies cease to
publish ratings of investments and in each case maturing within six months of
the Effective Time and (v) money market mutual or similar funds having assets
in excess of $1 billion. Any interest and other income resulting from such
investments shall be paid to the Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to CII that the statements
contained in this Article III are true and correct in all material respects.
3.01. Organization of the Company; Equity Investments. Each of the
Company and its Subsidiaries (as hereinafter defined) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power to own,
lease and operate its property and to carry on its business as now being
conducted. The Company and each of its Subsidiaries is duly qualified to do
business in each jurisdiction where such qualification is required, except
where the failure to so qualify does not constitute a Material Adverse Effect.
As used herein, "Material Adverse Effect" shall mean any event, circumstance,
condition or fact which has had or could reasonably be expected to have a
material adverse effect on the business, assets, financial condition,
prospects, financial projections or results of operations of the
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Company and its Subsidiaries taken as a whole. For purposes of this Agreement
(except Article IV and Section 7.03), the determination of whether any
particular event, circumstance, condition, fact, event or other matter is
"material" shall be based upon whether a purchaser in a leveraged acquisition
transaction (such as the transaction contemplated by this Agreement) would
reasonably consider such event, circumstance, condition, fact, event or other
matter to be material. Section 3.01 of the disclosure schedule delivered by
the Company to CII as of the date hereof (the "Company Disclosure Schedule")
sets forth with respect to the Company and each of its Subsidiaries, if a
corporation, its jurisdiction of incorporation, the states in which it is
qualified to do business as a foreign corporation, the authorized, issued and
outstanding capital stock and the percentage of each class of capital voting
stock owned by the Company or any of its Subsidiaries, and in the case of
unincorporated entities, the equivalent information as provided with regard to
corporate entities. Except as set forth in Section 3.01 of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries directly
or indirectly owns any equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for, any corporation,
partnership, joint venture or other business association or entity, excluding
securities in any publicly traded company held for investment by the Company
and comprising less than one percent of the outstanding stock of such company.
3.02. The Company's Capital Structure.
(a) Capitalization. All of the shares of Company Common
Stock outstanding were duly authorized, and are validly issued, fully paid and
nonassessable and were not issued in violation of any preemptive rights, and no
shares of Company Common Stock are held in the treasury of the Company or by
any Subsidiary of the Company. The Company previously delivered to CII a true
and correct copy of the list of the Company's shareholders as of March 31,1998.
Except as set forth in Section 3.02(a) of the Company Disclosure Schedule,
there are no obligations, contingent or otherwise, of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any shares of Company
Common Stock or the capital stock of any Subsidiary of the Company or to
provide funds to or make any investment (in the form of a loan, capital
contribution or otherwise) in any Subsidiary of the Company or any other
entity. All of the outstanding shares of capital stock of each of the Company's
Subsidiaries were duly authorized, and are validly issued, fully paid and
nonassessable and were not issued in violation of any preemptive rights, and
all such shares are owned by the Company or another Subsidiary of the Company,
free and clear of all security interests, liens, claims, pledges, agreements,
limitations on voting rights, charges or other encumbrances of any nature.
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(b) Convertible Securities. There are no equity
securities of any class of the Company or any of its Subsidiaries, or any
security exchangeable into or exercisable for such equity securities, issued,
reserved for issuance or outstanding. Except as set forth herein or in Section
3.02(b) of the Company Disclosure Schedule, there are no options, warrants,
equity securities, calls, rights, commitments or agreements of any character to
which the Company or any of its Subsidiaries is a party or by which any of them
is bound obligating the Company or any of its Subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of capital
stock of the Company or any of its Subsidiaries or obligating the Company or
any of its Subsidiaries to grant, extend, accelerate the vesting of, or enter
into any such option, warrant, equity security, call, right, commitment or
agreement. Except as set forth in Section 3.02(b) of the Company Disclosure
Schedule, there are no voting trusts, proxies or other agreements or
understandings with respect to the shares of capital stock of the Company to
which the Company or, to the knowledge of the Company, any other person is a
party.
(c) Definition of Subsidiary. As used herein, the term
"Subsidiary" shall mean, with respect to any party, corporation or other
organization, whether incorporated or unincorporated, any other corporation or
other organization, whether incorporated or unincorporated, of which (i) such
party or any other Subsidiary of such party is a general partner (excluding
partnerships, the general partnership interests of which held by such party or
any Subsidiary of such party do not have a majority of the voting interest in
such partnership) or (ii) at least a majority of the securities or other
interests having by their terms ordinary voting power to elect a majority of
the Board of Directors or others performing similar functions with respect to
such corporation or other organization is directly or indirectly owned or
controlled by such party or by any one or more of its Subsidiaries, or by such
party and one or more of its Subsidiaries.
3.03. Authority, No Conflict, Required Filings and Consents.
(a) Power and Authority. The Company has all requisite
corporate power and authority to enter into this Agreement and to consummate
the transactions contemplated by this Agreement. The execution and delivery of
this Agreement and the consummation of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate action on the
part of the Company, subject only to the approval of the Merger by two-thirds
of the outstanding shares of Company Common Stock in accordance with the TBCA
(the "Shareholder Approval"). This Agreement has been duly executed and
delivered by the Company and, assuming this Agreement constitutes a valid and
binding obligation of CII, constitutes the valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, subject
to applicable bankruptcy, insolvency, reorganization,
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moratorium or other similar laws affecting the rights of creditors generally
and general principles of equity.
(b) No Conflict. Subject to the Shareholder Approval, the
execution and delivery of this Agreement by the Company does not, and the
consummation of the transactions contemplated by this Agreement will not, (i)
conflict with, or result in any violation or breach of, any provision of the
Articles of Incorporation or Bylaws of the Company, (ii) result in any
violation or breach of, or constitute (with or without notice or lapse of time,
or both) a default (or give rise to right of termination, cancellation or
acceleration of any obligation or loss of any benefit) under, any of the terms,
conditions or provisions of any Company Material Contract (as hereinafter
defined) or (iii) conflict with or violate any permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Company or any of its Subsidiaries or any of its or their
properties or assets (other than those specifically addressed by the provisions
of Sections 3.07, 3.11 and 3.12), except in the case of (iii) for any such
breaches, conflicts, violations, defaults, terminations, cancellations or
accelerations which would not constitute a Material Adverse Effect.
(c) Consents. No consent, approval, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency, commission or other governmental authority or
instrumentality ("Governmental Entity") is required by or with respect to the
Company or any of its Subsidiaries in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby, except for (i) the filing of a Premerger Notification and Report Form
under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), and the expiration or termination of the waiting period pursuant
thereto, (ii) the filing of the Articles of Merger with the Secretary of State
of the State of Texas, (iii) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
state securities laws and (iv) such other consents, authorizations, filings,
approvals and registrations which, if not obtained or made, would not
constitute a Material Adverse Effect.
3.04. Financial Statements. The consolidated financial statements of
the Company (including, in each case, any related notes) for the years ended
December 31, 1996 and 1997 (the "Financial Statements") were prepared in
accordance with generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes to such financial statements) and fairly present the consolidated
financial position of the Company and its Subsidiaries at the respective dates
and the consolidated results of their operations and cash flows for the periods
indicated. The audited balance sheet of the Company as of December 31, 1997 is
referred to herein as the "Company Balance Sheet."
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3.05. No Undisclosed Liabilities. Except as disclosed herein or in
Section 3.05 of the Company Disclosure Schedule, the Company and its
Subsidiaries do not have any liabilities, either accrued or contingent (whether
or not required to be reflected in the Financial Statements in accordance with
GAAP), and whether due or to become due, other than (i) liabilities reflected
in the Financial Statements, including reserves for Taxes (as hereinafter
defined), and (ii) normal or recurring liabilities incurred since the date of
the Company Balance Sheet in the ordinary course of business consistent with
past practices which, individually or in the aggregate, do not constitute a
Material Adverse Effect.
3.06. Absence of Certain Changes or Events. Since the date of the
Company Balance Sheet, except as disclosed herein or in Section 3.06(a) of the
Company Disclosure Schedule, the Company and its Subsidiaries have conducted
their businesses in the ordinary course and in a manner consistent with past
practice and there has not been (i) any Material Adverse Effect, (ii) any
material change by the Company in its financial or tax accounting methods,
principles or practices, (iii) any revaluation by the Company or its
Subsidiaries of any of their assets, (iv) except for dividends in the amount of
$0.1125 per share of Company Common Stock paid in January 1998 and $0.075 per
share of Company Common Stock to be paid on or about April 10, 1998, any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to the equity interests of
the Company or any of its Subsidiaries, (v) any forgiveness, cancellation or
waiver by the Company or any of its Subsidiaries of debts owed to the Company
or any of its Subsidiaries or claims or rights of the Company or any of its
Subsidiaries against others, other than, in the ordinary course of business
consistent with past practice, (vi) (A) any increase in the rate or terms of
compensation (including termination and severance pay) payable or to become
payable by the Company to any of its directors, officers or employees, or any
increase in the rate or terms of any bonus, insurance, pension or other
employee benefit plan, program or arrangement made to, for or with any such
directors, officers or employees, except, in each case, increases occurring in
the ordinary course of business or as required by applicable law, or (B) any
entry by the Company or any of its Subsidiaries into any employment, severance
or termination agreement with any such person, (vii) any damage, destruction or
loss to the properties or assets owned or leased by the Company or any of its
Subsidiaries which constitutes a Material Adverse Effect, whether or not
covered by insurance, (viii) any change made or authorized in the Articles of
Incorporation or Bylaws of the Company or any of its Subsidiaries, (ix) any
purchase, redemption, issue, sale or other acquisition or disposition by the
Company or any of its Subsidiaries of any shares of capital stock or other
equity securities of the Company or any of its Subsidiaries, or the grant of
any options, warrants or other rights to purchase, or convert any obligation
into, shares of capital stock or any evidence of
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indebtedness or other securities of the Company or any of its Subsidiaries, (x)
any split, combination or reclassification of any of its outstanding capital
stock or any issuance or authorization of any issuance of any other securities
in respect of, in lieu of or in substitution for shares of the Company's or any
of its Subsidiaries' outstanding capital stock, (xi) any sale, lease, license,
encumbrance or disposition by the Company or any of its Subsidiaries of any of
its material assets not in the ordinary course of business, (xii) any write-off
or write-down of, or any determination to write-off or write-down, any material
assets or properties of the Company or any of its Subsidiaries or any material
portion thereof, (xiii) any expenditure or commitment for additions to
property, plant, equipment or other tangible capital assets or properties of
the Company or any of its Subsidiaries, except as set forth in Section 3.06(a)
of the Company Disclosure Schedule,(xiv) any promotional program implemented
that was intended to affect or has affected the Company's revenues in a manner
inconsistent with the Company's 1998 budget, a copy of which is attached as
Section 3.06(b) to the Company Disclosure Schedule (the "1998 Budget"), (xv)
any agreement to take any of the foregoing actions, or (xvi) any other action
or event that would have required the consent of CII pursuant to Section 5.01
of this Agreement had such action or event occurred after the date of this
Agreement.
3.07. Taxes.
(a) Definition of Taxes. For purposes of this Agreement,
"Tax" or, collectively, "Taxes" means any and all federal, state, local and
foreign taxes, assessments and other governmental charges, duties, impositions
and liabilities, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupations and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, excise and
property taxes, together with all interest, penalties and additions imposed
with respect to such amounts and any obligations under any agreements or
arrangements with any other person with respect to such amounts and including
any liability for taxes of a predecessor entity.
(b) Tax Returns and Audits. Except as set forth in
Section 3.07(b) of the Company Disclosure Schedule:
(i) Each of the Company and its Subsidiaries has
timely filed or caused to be timely filed all income, franchise and material
other tax returns (each a "Tax Return") required to be filed by or with respect
to it, except where the failure to do so does not constitute a Material Adverse
Effect. All foreign, state and local Tax jurisdictions where the Company and
its Subsidiaries have filed Tax returns for the three full tax periods ending
prior to the date hereof are set forth in Section 3.07(b) of the Company
Disclosure Schedule. Since January 1, 1995, the Company has received no written
notice of any claim made by any taxing
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authority in any jurisdiction not set forth in Section 3.07(b) of the Company
Disclosure Schedule that the Company is or may be subject to taxation by that
jurisdiction.
(ii) The Company and each of its Subsidiaries have
timely paid all Taxes that are due from or with respect to it, except where the
failure to do so does not constitute a Material Adverse Effect. With respect to
any period for which Taxes are not yet due, the Company and each of its
Subsidiaries have established adequate reserves for such Taxes in the Financial
Statements (including the Company Balance Sheet). The Company and each of its
Subsidiaries have made all required estimated Tax payments sufficient to avoid
any underpayment penalties, except where the failure to do so does not
constitute a Material Adverse Effect. The Company and each of its Subsidiaries
have withheld and paid all Taxes required by all applicable laws to be withheld
or paid in connection with any amounts paid or owing to any employee, creditor,
independent contractor or other third party, except where the failure to do so
does not constitute a Material Adverse Effect. No material deficiencies for any
Tax, assessment or governmental charge are proposed against the Company, its
Subsidiaries or any of their assets.
(iii) No waiver or extension of time to assess or
collect any Taxes has been given by or requested of the Company or any of its
Subsidiaries. The Tax Returns of the Company and its Subsidiaries have not been
audited by the Internal Revenue Service or comparable state or local agencies
since the dates of the most recent audit set forth in the Company Disclosure
Schedule and no audit or administrative or judicial proceeding in respect of
Taxes due from or with respect to the Company or any of its Subsidiaries is
pending or, to the knowledge of the Company, threatened. No closing agreement
pursuant to Section 7121 of the Internal Revenue Code of 1986, as amended (the
"Code") (or any predecessor provision) or any similar provision of any state,
local or foreign law has been entered into by or with respect to the Company or
any of its Subsidiaries.
(iv) No consent to the application of Section
341(f)(2) of the Code (or any predecessor provision) has been made or filed by
or with respect to the Company or any of its Subsidiaries or any of their
assets. The Company and its Subsidiaries have not agreed (and no agreement has
been made on behalf of the Company or its Subsidiaries) to make any adjustment
pursuant to Section 481(a) of the Code (or any predecessor provision) by reason
of any change in any accounting method, there is no application pending with
any taxing authority requesting permission for any changes in any accounting
method of the Company or any of its Subsidiaries nor has the Internal Revenue
Service proposed any such changes in accounting method. None of the assets of
the Company or its Subsidiaries is or will be required to be treated as being
owned by any person (other than the Company or its Subsidiaries) pursuant to
the provisions of Section 168(f)(8) of the Code as in effect immediately before
the enactment of the Tax Reform Act of 1986.
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(v) None of the Company or any of its
Subsidiaries is a party to, is bound by or has any obligation under any Tax
sharing agreement, Tax allocation agreement, Tax indemnity agreement or any
other similar contract.
(vi) There are no deferred gains with respect to
intercompany transactions for purposes of Treasury Regulation Section 1.1502-13
(and any predecessor regulation) with respect to the Company or any of its
Subsidiaries; and there are no excess loss accounts with respect to the stock
of any of the Subsidiaries for purposes of Treasury Regulation Section
1.1502-19.
(vii) The Company is not and during the five
preceding years has not been a United States real property holding corporation
(as defined in Section 897(c)(2) of the Code).
(c) Parachute Payments. There is no contract, agreement,
plan or arrangement covering any person that, individually or collectively,
could give rise to the payment by the Company or any of its Subsidiaries of any
amount that would not be deductible by reason of Section 280G of the Code.
3.08. Intellectual Property.
(a) Ownership. The Company owns, or is licensed or
otherwise possesses legally enforceable rights to use, all patents, software
licenses and knowhow licenses, trademarks, trade names, service marks,
copyrights and any applications for such patents, trademarks, trade names,
services marks and copyrights, or tangible or intangible proprietary
information or materials that are necessary to conduct the business of the
Company and its Subsidiaries as currently conducted, the absence of which would
constitute a Material Adverse Effect (the "Company Intellectual Property
Rights"). Section 3.08 of the Company Disclosure Schedule contains an accurate
and complete list of all federal or state registrations of domestic and foreign
letters patent, patents, trademarks, trade names, service marks, copyrights and
applications for patents, trademarks, trade names, service marks and copyrights
and all material agreements to which the Company or any of its Subsidiaries is
a party relating to Company Intellectual Property Rights. The Company and its
Subsidiaries own the entire right, title and interest in and to the trademarks,
trade names, service marks, copyrights, trade secrets and other confidential
proprietary information used in the operation of their business (including,
without limitation, the right to use and license the same), except where the
failure to own such right, title and interest would not constitute a Material
Adverse Effect.
(b) Default. Neither the Company nor any of its
Subsidiaries is, nor will it be as a result of the execution and
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delivery of this Agreement, or the performance of its obligations under this
Agreement, in breach of any license, sublicense or other agreements relating to
the Company Intellectual Property Rights, the breach of which would constitute
a Material Adverse Effect.
(c) Valid Rights. To the Company's knowledge, all Company
Intellectual Property Rights are valid and subsisting. Neither the Company nor
any of its Subsidiaries (i) has been sued in any suit, action or proceeding
which involves a claim of infringement of any patents, trademarks, service
marks or copyrights or violation of any trade secret or other proprietary right
of any third party or (ii) has any knowledge that the conduct of its business
as presently conducted infringes any patent, trademark, service ▇▇▇▇,
copyright, trade secret or other proprietary right of any third party, which
such infringement would constitute a Material Adverse Effect.
3.09. Agreements, Contracts and Commitments. Except as disclosed
herein, Section 3.09 of the Company Disclosure Schedule sets forth a list of
all Company Material Contracts. Neither the Company nor any of its Subsidiaries
has breached, or received in writing any claim or threat that it has breached,
any of the terms and conditions of any agreement, contract or commitment (i)
involving or which could reasonably be expected to involve a dollar amount or
dollar value in excess of $500,000 or (ii) containing covenants limiting the
freedom of the Company or any of its Subsidiaries to compete in any line of
business or with any person or in any geographical area (the "Company Material
Contracts") in such a manner as would permit any other party to cancel or
terminate the same or would permit any other party to seek material damages
from the Company or its Subsidiaries under any Company Material Contract. Each
Company Material Contract that has not expired or been terminated is binding
and in full force and effect and, to the Company's knowledge, no party thereto
is subject to any material default thereunder.
3.10. Litigation. Except as described in Section 3.10 of the Company
Disclosure Schedule, there is no action, suit or proceeding, claim, arbitration
or investigation pending or, to the knowledge of the Company, threatened
against the Company, any of its Subsidiaries or any of their respective
properties, assets or rights before any court, arbitrator or administrative or
governmental body which constitutes a Material Adverse Effect, or could prevent
the Company from consummating the transactions contemplated by this Agreement.
Except as set forth in Section 3.10 of the Company Disclosure Schedule, there
is no judgment, decree, injunction or order of any court, governmental
department, commission, agency, instrumentality or arbitrator outstanding with
respect to the Company.
3.11. Environmental Matters. Except as set forth in Sections 3.10
and 3.11 of the Company Disclosure Schedule:
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(a) Hazardous Materials. To the knowledge of the Company,
no underground storage tanks are present under any property that the Company or
any of its Subsidiaries has owned, operated, occupied or leased since January
1, 1995. No material amount of any Hazardous Materials (as hereinafter defined)
is present in, on or under any property owned, operated or leased by the
Company since January 1, 1995 in an amount that constitutes a Material Adverse
Effect.
(b) Hazardous Materials Activities. At no time has the
Company or any of its Subsidiaries transported, stored, used, manufactured,
disposed of, released or exposed its employees or others to Hazardous Materials
in violation of any Environmental Laws (as hereinafter defined), nor has the
Company or any of its Subsidiaries disposed of, transported, sold or
manufactured any product containing a Hazardous Material (collectively,
"Hazardous Materials Activities") in violation of any Environmental Laws,
except for any violation that does not constitute a Material Adverse Effect.
(c) Environmental Liabilities. No action, proceeding,
investigation, revocation proceeding, amendment procedure, lien, writ,
injunction or claim is pending or, to the knowledge of the Company, threatened
against the Company or any of its Subsidiaries concerning any Hazardous
Materials Activity of the Company or any of its Subsidiaries. The Company is
not aware of any fact, circumstance or condition that could reasonably be
expected to involve the Company or any of its Subsidiaries or any property
owned, operated or leased by the Company or any of its Subsidiaries in any
environmental litigation or impose upon the Company or any of its Subsidiaries
any environmental liability that constitutes a Material Adverse Effect.
(d) Definitions. The following words shall have the
following meanings for purposes of this Section 3.11:
(i) "Environmental Law" means any applicable
federal, state, local or foreign laws (including common laws), statutes, codes,
ordinances, rules, regulations or other requirements relating to the
environment, natural resources or public or employee health and safety and
includes, but is not limited to, the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), 42 U.S.C. Section 9601 et seq., the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et seq., the
Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. Section 6901 et
seq., the Clean Water Act, 33 U.S.C. Section 1251 et seq., the Clean Air Act,
33 U.S.C. Section 2601 et seq., the Toxic Substances Control Act, 15 U.S.C.
Section 2601 et seq., the Federal Insecticide, Fungicide and Rodenticide Act, 7
U.S.C. Section 136 et seq., the Oil Pollution Act of 1998, 33 U.S.C. Section
2701 et seq. and the Occupational Safety and Health Act, 29 U.S.C. Section 651
et seq., as such laws have been amended or supplemented, and the regulations
promulgated pursuant thereto, and all analogous state or local statutes.
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(ii) "Hazardous Materials" means any substance,
material or waste to the extent regulated or defined by any governmental
authority as a "hazardous waste," "hazardous material," "hazardous substance,"
"extremely hazardous waste," "restricted hazardous waste," "contaminant,"
"toxic waste" or "toxic substance" or words of similar meaning, and includes,
but is not limited to, petroleum, petroleum products, asbestos, urea
formaldehyde and polychlorinated biphenyls.
(iii) "Subsidiaries" of the Company means all
Subsidiaries of the Company other than any entity that was a Subsidiary of the
Company prior to, but not on or after, January 1, 1995.
3.12. Employee Benefit Plans.
(a) Company Employee Plans. The Company has set forth in
Section 3.12 of the Company Disclosure Schedule all employee benefit plans as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and all bonus, stock option, stock purchase, incentive,
disability, salary continuation, educational assistance, deferred compensation,
supplemental retirement, severance and other similar employee benefit plans and
all unexpired severance agreements, written or otherwise, for the benefit of or
relating to, any current or former employee of the Company or any trade or
business (whether or not incorporated) which is under common control with the
Company (an "ERISA Affiliate") within the meaning of Section 414 of the Code or
any Subsidiary of the Company (together, the "Company Employee Plans").
(b) ERISA Liability. With respect to the Company Employee
Plans, individually and in the aggregate, no event has occurred, and to the
knowledge of the Company, there exists no condition or set of circumstances, in
connection with which the Company or any of its Subsidiaries could be subject
to any liability that constitutes a Material Adverse Effect under ERISA, the
Code or any other applicable law.
(c) Unfunded Benefits. Except as set forth in Section
3.12 of the Company Disclosure Schedule, with respect to the Company Employee
Plans, individually and in the aggregate, there are no benefit obligations
required to be funded for which contributions have not been made or properly
accrued and there are no unfunded benefit obligations which have not been
accounted for by reserves, or otherwise properly footnoted in accordance with
generally accepted accounting principles on the financial statements of the
Company, which obligations constitute a Material Adverse Effect.
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(d) Employee Agreements. Except as provided for herein or
in Section 3.12 to the Company Disclosure Schedule, neither the Company nor any
of its Subsidiaries is party to any oral or written (i) union or collective
bargaining agreement, (ii) agreement with any officer or other key employee of
the Company or any of its Subsidiaries, the benefits of which are contingent,
or the terms of which are materially altered, upon the occurrence of a
transaction involving the Company or any of its Subsidiaries of the nature
contemplated by this Agreement, (iii) agreement with any officer or employee of
the Company or any of its Subsidiaries providing any term of employment or
compensation guarantee or (iv) agreement or plan, including any stock option
plan, stock appreciation right plan, restricted stock plan or stock purchase
plan, any of the benefits of which will be increased, or the vesting of the
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions
contemplated by this Agreement.
(e) Documents. With respect to each Company Employee
Plan, a complete and correct copy of each of the following documents (if
applicable) has been provided to CII: (i) the most recent plan and related
trust documents, and all amendments thereto; (ii) the most recent summary plan
description, and all related summaries of modifications; (iii) the most recent
Form 5500 (including schedules); (iv) the most recent IRS determination letter;
and (v) the most recent actuarial reports (including for purposes of Financial
Accounting Standards Board report no. 87, 106 and 112).
(f) Claims. There are no pending or, to the knowledge of
Company, threatened actions, claims or proceedings against any Company Employee
Plan or its assets, plan sponsor, plan administrator or fiduciaries with
respect to the operation of such plan (other than routine benefit claims).
3.13. Compliance with Laws. The Company and its Subsidiaries have
complied with, are not in violation of, and have not received any notices of
violation with respect to, any federal, state or local statute, law or
regulation with respect to the conduct of their businesses, or the ownership or
operation of their businesses (other than those specifically addressed by the
provisions of Sections 3.07, 3.11 and 3.12), except for failures to comply or
violations which would not constitute a Material Adverse Effect.
3.14. Labor Relations.
(a) Organizing Activities. Since April 1, 1995 there have
been no representation or certification proceedings, or petitions seeking a
representation proceeding, pending or, to the knowledge of the Company,
threatened in writing to be brought or filed with the National Labor Relations
Board or any other labor
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relations tribunal or authority involving the Company or any of its
Subsidiaries. Except as described in Section 3.14 of the Company Disclosure
Schedule, since April 1, 1995, to the knowledge of the Company, there have been
no organizing activities involving the Company and its Subsidiaries with
respect to any group of employees of the Company or any of its Subsidiaries.
(b) Strikes and Grievances. Except as described in
Section 3.10 of the Company Disclosure Schedule, there are no strikes, work
stoppages, slowdowns, lockouts, arbitrations or grievances or other labor
disputes pending or, to the Company's knowledge, threatened against or
involving the Company or any of its Subsidiaries.
3.15. Insurance. The Company has insurance policies in full force
and effect for such amounts as are sufficient for compliance in all material
respects with all requirements of law and of all agreements to which the
Company and its Subsidiaries are parties or by which they are bound. To the
knowledge of the Company, no event relating to the Company or its Subsidiaries
or their business has occurred with respect to which the Company has received
written notice that it will result in a retroactive upward adjustment in
premiums under any such insurance policies. Excluding insurance policies that
have expired and been replaced in the ordinary course of business, no insurance
policy has been canceled since April 1, 1996 and, to the knowledge of the
Company, no threat has been made to cancel any insurance policy of the Company
or its Subsidiaries during such period. To the knowledge of the Company, all
such insurance will remain in full force and effect with respect to periods
before the Closing after giving effect to the Merger and the transactions
contemplated hereby. To the knowledge of the Company, no event has occurred,
including, without limitation, the failure by the Company or its Subsidiaries
to give any notice or information or the Company or its Subsidiaries giving any
inaccurate or erroneous notice or information, which limits or impairs the
rights of the Company or its Subsidiaries under any such insurance policies.
3.16. Real Estate.
(a) Title to Owned Real Property. All real property owned
in fee by the Company or its Subsidiaries is listed and described in Section
3.16(a) of the Company Disclosure Schedule, and title to such property,
together with all appurtenant easements thereunto and all structures, fixtures
and improvements located thereon (the "Owned Real Property"), is good and
indefeasible, fee simple absolute and free and clear of all Liens (as
hereinafter defined), including all boundary disputes, covenants, rights of
way, leases and title objections, excepting only the Permitted Exceptions (as
hereinafter defined) and such other exceptions as do not constitute a Material
Adverse Effect. The Company has heretofore delivered or made available to CII
true, correct and complete copies of all policies of title insurance and any
surveys
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in the Company's or any Subsidiary's possession for the Owned Real Property. As
used herein, (i) "Liens" means title defects, liens, pledges, claims, security
interests, restrictions, mortgages, tenancies and other possessory interests,
conditional sale or other title retention agreements, assessments, easements,
rights of way, covenants, restrictions, rights of first refusal, defects in
title, encroachments and other burdens, options or encumbrances of any kind,
and (ii) "Permitted Exceptions" means all liens for taxes, assessments and
other governmental charges not yet due and payable, non-consensual liens
imposed by operation of law (including without limitation landlord liens for
rent not yet due and payable and materialmen and mechanics liens not yet
delinquent), deposits for workers' compensation and unemployment insurance, all
matters that a current survey would show and all other easements,
encroachments, protrusions, restrictions and reservations that, individually
and in the aggregate, do not materially and adversely affect the current use of
the property or materially diminish the value thereof.
(b) Leased Real Property. Other than as between the
Company and its Subsidiaries, there is only one lease, sublease or other
agreement (the "Real Property Lease") under which the Company or any of its
Subsidiaries uses or occupies or has the right to use or occupy, now or in the
future, any real property, such Real Property Lease being described in Section
3.16(b) of the Company Disclosure Schedule. The Company has previously
delivered to CII a true, correct and complete copy of the Real Property Lease
(including all modifications, amendments and supplements thereto). The Real
Property Lease is valid, binding and in full force and effect with respect to
the Company and, to the knowledge of the Company, the landlord, and no
termination event or condition or uncured default of a material nature on the
part of the Company, or to the Company's knowledge, the landlord, exists under
the Real Property Lease. The Company has a good and valid leasehold interest in
the property that is the subject of the Real Property Lease, free and clear of
all Liens.
3.17. Personal Property. Except as set forth in Section 3.17 of the
Company Disclosure Schedule, the Company or its Subsidiaries own, free and
clear of all Liens (except (a) statutory Liens not yet delinquent or the
validity of which are being contested in good faith by appropriate actions, (b)
purchase money Liens arising in the ordinary course, (c) Liens for taxes not
yet delinquent, (d) Liens reflected in the Financial Statements (which have not
been discharged) and (e) such Liens which, individually or in the aggregate, do
not constitute a Material Adverse Effect), all material machinery, equipment,
furniture, fixtures, inventory, receivables and other tangible or intangible
personal property reflected on the Company Balance Sheet and all such property
acquired since the date thereof, except for sales and other dispositions of
such property made in the ordinary course of business consistent with past
practices since December 31, 1997.
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3.18. Customers, Suppliers and Employees. Except as described in
Section 3.18 of the Company Disclosure Schedule, since December 31, 1997 there
has not been any change in the business relationship of the Company or its
Subsidiaries with its displayers as a whole or any supplier, other than any
changes that do not constitute a Material Adverse Effect. The Company has not
received any oral or written notice that any displayer, supplier or employee of
the Company will terminate his relationship with the Company or its
Subsidiaries as a result of the consummation of the transactions contemplated
hereby.
3.19. Potential Conflicts of Interest. Except as set forth in
Section 3.19 of the Company Disclosure Schedule or otherwise disclosed herein,
none of the shareholders of the Company who own in excess of 1% of the
outstanding shares of Company Common Stock, and none of the officers or
directors of the Company or its Subsidiaries or any entity (other than the
Company's Subsidiaries) controlled by any of the foregoing (other than the
Company), (i) owns, directly or indirectly, any interest in, or is a director,
officer, employee, consultant or agent of, any person who is a competitor,
lessor, lessee or customer of, or supplier of goods or services to, the Company
or its Subsidiaries, (ii) owns, directly or indirectly, in whole or in part,
any real property, leasehold interests or other property with a fair market
value of at least $50,000 in the aggregate the use of which is necessary for
the business of the Company or its Subsidiaries, (iii) has sold to, or
purchased from, the Company or its Subsidiaries any assets or property for
aggregate consideration in excess of $50,000 since January 1, 1997 (except for
transactions specifically permitted hereby or described herein), or (iv) is a
party to any contract or participates in any arrangement, written or oral, with
the Company or any of its Subsidiaries.
3.20. Vote Required. The affirmative vote of the holders of
two-thirds of the outstanding shares of Company Common Stock is the only vote
of the holders of any class or series of Company capital stock necessary to
approve the Merger.
3.21. Proxy Statement; Offering Memorandum. None of the information
supplied or to be supplied by the Company or any of its affiliates, directors,
officers, employees, agents or representatives for inclusion in, and which is
included in, the Proxy Statement or the Offering Memorandum (as hereinafter
defined) will, in the case of the Proxy Statement, at the time of mailing of
the Proxy Statement to the Company's shareholders or the Company Shareholders'
Meeting, and, in the case of the Offering Memorandum, at the time the
definitive Offering Memorandum is printed, be false or misleading with respect
to any material fact, or omit to state any material fact necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading or necessary to correct any statement. As used
herein, the "Offering Memorandum" means the offering memorandum relating to the
offer and sale by the Company of debt securities concurrently with the Closing
to finance a portion of the Merger Consideration.
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3.22. Board Recommendation. The Board of Directors of the Company,
at a meeting duly called and held, has by the vote of those directors present
(i) determined that this Agreement and the transactions contemplated hereby are
fair to and in the best interests of the shareholders of the Company and has
approved the same and (ii) resolved to recommend that the shareholders of the
Company approve this Agreement and the transactions contemplated hereby.
3.23. Accounts Receivable. The accounts receivable of the Company
and its Subsidiaries as set forth on the Company Balance Sheet, or arising
since the date thereof, have arisen solely out of bona fide sales, performance
of services and other business transactions in the ordinary course of business
consistent with past practice.
3.24. Inventory. All inventory of the Company and its Subsidiaries
used in the conduct of their respective businesses, including raw materials,
work in progress and finished goods, reflected on the Company Balance Sheet or
acquired since the date thereof, was acquired and has been maintained in the
ordinary course of business and, to the knowledge of the Company, consists
substantially of a quantity, quality and condition useable and salable in the
ordinary course of business.
3.25. Information Supplied. To the knowledge of the Company, neither
this Agreement nor the Company Disclosure Schedule contains any untrue
statement of a material fact or omits to state any material fact required to be
stated herein or therein or necessary to make the statements herein or therein,
in light of the circumstances under which they are made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CII
CII represents and warrants to the Company that the statements
contained in this Article IV are true and correct in all material respects.
4.01. Organization of CII. CII is a corporation duly organized,
validly existing and in good standing under the laws of the State of Texas.
4.02. CII's Capital Structure.
(a) Capitalization. As of the date hereof, the authorized
capital stock of CII consists of 10,000 shares of CII Common Stock. As of the
date hereof, (i) 1,000 shares of CII
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Common Stock were outstanding, all of which were duly authorized and are
validly issued, fully paid, nonassessable and owned by HM/RB Partners, L.P., a
Delaware limited partnership ("HMRB"), and were not issued in violation of any
preemptive rights, and (ii) no shares of CII Common Stock were held in the
treasury of CII.
(b) Convertible Securities. Except as contemplated by
this Agreement, there are no equity securities of any class of CII, or any
security exchangeable into or exercisable for such equity securities, issued,
reserved for issuance or outstanding. Except as contemplated by this Agreement,
there are no options, warrants, equity securities, calls, rights, commitments
or agreements of any character to which CII is a party or by which it is bound
obligating CII to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock of CII or obligating CII to grant,
extend, accelerate the vesting of, or enter into any such option, warrant,
equity security, call, right, commitment or agreement. There are no voting
trusts, proxies or other agreements or understandings with respect to the
shares of CII Common Stock.
4.03. Subsidiaries; Operations. CII was organized on April 7, 1998.
CII has no direct or indirect Subsidiaries. Except for the transactions
contemplated by this Agreement or as set forth in the disclosure schedule
delivered by CII to the Company as of the date hereof (the "CII Disclosure
Schedule"), CII has not had at any time any assets or liabilities or entered
into any agreements of any kind (except for any agreement incident to its
organization). CII has not conducted any business or operations except for
activities incident to its organization and carrying out the transactions
contemplated hereby.
4.04. Authority; No-Conflict; Required Filings and Consents.
(a) Power and Authority. CII has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate action on the
part of CII. This Agreement has been duly executed and delivered by CII and,
assuming this Agreement constitutes a valid and binding obligation of the
Company, constitutes the valid and binding obligation of CII, enforceable
against it in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
rights of creditors generally and general principles of equity.
(b) No Conflict. The execution and delivery of this
Agreement by CII does not, and the consummation of the transactions
contemplated by this Agreement will not, (i) conflict with, or result in any
violation or breach of any provision of, the Articles of Incorporation or
Bylaws of CII, (ii) result in any violation or
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breach of, or constitute (with or without notice or lapse of time, or both) a
default (or give rise to a right of termination, cancellation or acceleration
of any obligation or loss of any benefit) under, any of the terms, conditions,
or provisions of any material note, bond, mortgage, indenture, lease, contract
or other agreement, instrument or obligation to which CII is a party or by
which it or its properties or assets may be bound or (iii) conflict with or
violate any permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to CII or any of its
properties or assets.
(c) Consents. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity, is required by or with respect to CII in connection with the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for (i) the filing of a Premerger Notification and
Report Form under the HSR Act and (ii) the filing of the Articles of Merger
with the Secretary of State of the State of Texas.
4.05. Litigation. There is no action, suit or proceeding, claim,
arbitration or investigation against CII pending or, to CII's knowledge,
threatened against CII or any of its properties, assets or rights before any
court, arbitrator or administrative or environmental body, which could prevent
CII from consummating the transactions contemplated by this Agreement.
4.06. Financing. Prior to the date hereof, CII has delivered to the
Company true and correct copies of (i) a commitment letter from HMRB to provide
equity financing in an amount not less than $220,000,000 to provide CII a
portion of the funds necessary to consummate the transactions contemplated
hereby, (ii) a commitment letter from NationsBank, N.A. to provide to an
affiliate of HMRB senior debt financing and (iii) a "highly confident" letter
(together with the NationsBank, N.A. letter referred to in clause (ii), the
"Commitment Letters") from Bear, ▇▇▇▇▇▇▇ & Co., Inc. ("Bear ▇▇▇▇▇▇▇") to
provide to the Company subordinated debt financing. The aggregate amount of
money to be provided pursuant to the Commitment Letters shall be not less than
$500,000,000 in the aggregate (not more than $250,000,000 of which shall be
subordinated debt financing) and shall provide the Company with all remaining
funds necessary to consummate the transactions contemplated hereby.
ARTICLE V
CONDUCT OF BUSINESS
5.01. Covenants of the Company. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, the Company agrees as to itself and its
Subsidiaries (except to the extent that
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CII shall otherwise consent in writing), to carry on its business in the usual,
regular and ordinary course in substantially the same manner as previously
conducted, and shall use their reasonable efforts to (a) preserve intact their
present business organization, (b) keep available the services of their present
officers and employees and (c) preserve their relationships with customers,
suppliers, displayers and others having business dealings with them. Without
limiting the generality of the foregoing, prior to the Effective Time, and
except as expressly contemplated or permitted by this Agreement or required by
applicable law, the Company will not, and will not permit any of its
Subsidiaries to, without the prior written consent of CII (which consent shall
not be unreasonably withheld or delayed):
(i) split, combine or reclassify any shares of
its capital stock, declare, pay or set aside for payment any dividend or other
distribution in respect of its capital stock (except for a dividend in the
amount of $0.075 per share of Company Common Stock to be paid on or about April
10, 1998) or directly or indirectly redeem, purchase or otherwise acquire any
shares of its capital stock or any securities or obligations convertible into
or exchangeable for any shares of its capital stock, or any options, warrants
or conversion or other rights to acquire any shares of its capital stock or any
such securities or obligations or other securities;
(ii) issue, sell, pledge, dispose of, encumber or deliver
(whether through the issuance or granting of any options, warrants,
commitments, subscriptions, rights to purchase or otherwise) any stock of any
class of the Company or its Subsidiaries or any securities convertible into or
exercisable or exchangeable for shares of stock of any class of the Company or
its Subsidiaries (other than issuance of stock certificates in replacement of
lost stock certificates);
(iii) intentionally incur any material liability or
obligation (absolute, accrued, contingent or otherwise) other than in the
ordinary course of business consistent with past practices;
(iv) incur any obligation for borrowed money or purchase
money indebtedness, whether or not evidenced by a note, bond, debenture or
similar instrument, or assume, guarantee, endorse or otherwise as an
accommodation become responsible for the obligations of any other person;
(v) acquire or agree (by merger, consolidation or
acquisition of stock or assets) any corporation, partnership or other business
organization or division or significant assets thereof, or acquire, or agree to
acquire, directly or indirectly, any equity interest in any person, or incur or
commit to incur capital expenditures in excess of the amounts reflected in the
1998 Budget;
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(vi) amend or modify its Articles of Incorporation or
Bylaws (except as expressly provided in this Agreement);
(vii) sell, lease, license, encumber (including the
granting of any Liens) or dispose of any of its material assets, other than
sales of inventory in the ordinary course of business consistent with past
practices or as otherwise permitted by this Agreement;
(viii) amend or terminate any agreement listed in Section
3.09 of the Company Disclosure Schedule, other than in the ordinary course of
business consistent with past practices;
(ix) make any change in its financial or tax accounting
methods, principles or practices or make or cause to be made any elections on
tax returns of the Company or any Subsidiary, unless required by GAAP or
applicable law;
(x) extend credit in the sale of products, collection of
receivables or otherwise, other than in the ordinary course of business
consistent with past practices;
(xi) fail to maintain its books, accounts and records in
the usual, regular and ordinary manner on a basis consistent with prior years;
(xii) fail to use reasonable efforts to take any action
where such failure would cause any representation or warranty in Article III
(but excluding any representations or warranties which specifically relate to
an earlier date) to be untrue or incorrect in any material respect as of the
Closing or any of the conditions to the Merger set forth in Article VII not
being satisfied;
(xiii) adopt or amend in any respect any Company Employee
Plan other than as required by law(except for the proposed conversion of the
ESOP into a 401(k) plan);
(xiv) hire or agree to hire any executive officer, grant to
any employee any increase in compensation or in severance or termination pay,
grant any severance or termination pay or enter into any employment agreement
with any executive officer, except as may be required under employment or
termination agreements in effect on the date of this Agreement or consistent
with prior practices;
(xv) implement any promotional program that is intended to
affect the Company's revenues in a manner inconsistent with the 1998 Budget; or
(xvi) agree, in writing or otherwise, to do any of the
foregoing.
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Nothing in this Section 5.01 or otherwise in this Agreement shall prohibit the
Company from selling that certain King Air B200 aircraft or cashing in
certificates of deposit (provided that the Company shall not sell the King Air
B200 for less than $1,300,000 without the prior written consent of CII).
5.02. Cooperation. Subject to compliance with applicable law, from
the date hereof until the Effective Time, each of CII and the Company shall
confer on a regular basis with one or more representatives of the other party
to report material operational matters and the general status of ongoing
operations of the Company and shall promptly provide the other party or its
counsel with copies of all filings made by such party with any Governmental
Entity in connection with this Agreement and the transactions contemplated
hereby.
5.03. Conversion of ESOP. Prior to the Closing Date, the
Company shall amend, effective immediately prior to the Closing Date but
subject to the Closing, the Home Interiors & Gifts, Inc. Employee Stock
Ownership Plan and the Home Interiors & Gifts, Inc. Employee Stock Ownership
Plan Trust Agreement to (i) delete all provisions relating to shares of stock
of the Company, including Sections 4.3(b), 4.4 and 9.9 through 9.13 of the ESOP
and similar provisions, (ii) eliminate after the Closing Date all rights under
the ESOP relating to employer stock, and (iii) change the ESOP from an employee
stock ownership plan to a profit sharing plan. Further, to the extent allowed
by ERISA, the Company shall not pay or agree to pay for any expense incurred by
the ESOP in connection with the transactions contemplated by this Agreement,
including any costs incurred in respect of the assertion of appraisal rights
with respect to Company Common Stock held by the ESOP. CII shall have the right
to review all written communications to ESOP participants relating to the
transactions contemplated by this Agreement, including any materials to be
distributed to the ESOP participants relating to the exercise of their rights
under the the ESOP, prior to such communications or materials being provided to
the ESOP participants.
ARTICLE VI
ADDITIONAL AGREEMENTS AND COVENANTS
6.01. No Solicitation. Neither the Company, nor any of its
Subsidiaries, nor any officer, director, employee, representative, affiliate or
agent of the Company or any of its Subsidiaries (including, without limitation,
any investment banker, attorney or accountant retained by the Company or any of
its Subsidiaries), shall (i) solicit or initiate any inquiries or proposals
that constitute a proposal or offer for a merger, consolidation, business
combination, sale, lease, mortgage, pledge or other disposition of 10% or more
of the assets, sale of shares of capital stock (including without limitation by
way of a tender
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offer or share exchange) or similar transaction involving the Company or any of
its Subsidiaries, other than the transactions contemplated by this Agreement
(any of the foregoing inquiries or proposals being referred to in this
Agreement as an "Acquisition Proposal"), (ii) engage in negotiations or
discussions concerning, or provide any non- public information to any person or
entity relating to any such inquiries or any such Acquisition Proposal or (iii)
agree to, approve or recommend to the shareholders of the Company any
Acquisition Proposal, and the Company shall notify CII in writing (as promptly
as practicable) of all of the relevant details relating to, and all material
aspects of, all inquiries and proposals which it or any of its Subsidiaries or
any of their respective representatives may receive relating to any of such
matters and, if such inquiry or proposal is in writing, the Company shall
deliver to CII a copy of such inquiry or proposal as promptly as practicable;
provided, however that nothing contained in this Agreement shall prevent the
Company or its Board of Directors from furnishing information to, or entering
into discussions or negotiations with, any person or entity in connection with
an unsolicited bona fide Acquisition Proposal by such person or entity or
recommending an unsolicited bona fide written Acquisition Proposal to the
shareholders of the Company, or withdrawing or modifying the recommendation of
the Board of Directors of the Company, if and only to the extent that (1) the
Board of Directors determines in good faith after consultation with and upon
the advice of outside legal counsel that such action is necessary for it to
comply with its fiduciary duties to shareholders under applicable law, (2)
prior to furnishing such information to or entering into discussions or
negotiations with such person or entity, or withdrawing or modifying the
recommendation of the Board of Directors of the Company, the Company (A)
provides reasonable notice to CII to the effect that it is taking such action
and (B) receives from such person or entity an executed confidentiality
agreement with terms no less favorable to such party than those contained in
the that certain letter agreement dated November 10, 1997 between CII's
affiliate and the Company (the "Confidentiality Agreement") and (3) the Company
shall promptly and continuously advise CII as to all relevant details relating
to, and all materials aspects of, any such discussions or negotiations.
6.02. Proxy Statement. As soon as practicable after the date hereof,
the Company shall prepare a proxy statement (the "Proxy Statement") to be sent
to the shareholders of the Company in connection with the meeting of the
Company's shareholders (the "Company Shareholders' Meeting") to be held on or
about May 16, 1998 to consider the Merger. The Proxy Statement shall include
the recommendation of the Board of Directors of the Company in favor of this
Agreement and the Merger, provided that the Board of Directors of the Company
may withdraw such recommendation under the circumstances described in Section
6.01.
6.03. Access to Information. The Company shall (and shall cause its
Subsidiaries to) afford to the officers, employees,
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accountants, counsel and other representatives of CII reasonable access, during
normal business hours during the period prior to the Effective Time, to all its
properties, books, contracts, commitments and records and, during such period,
the Company shall (and shall cause its Subsidiaries to) furnish promptly to CII
all information concerning its business, properties and personnel as CII may
reasonably request, provided, however, that the Company shall have the right to
impose limitations on such access and to schedule such access so as to minimize
the disruption to the businesses of the Company and its Subsidiaries. Unless
otherwise required by law, CII will hold any such information which is
non-public in confidence in accordance with the Confidentiality Agreement.
6.04. Shareholders Meeting. As promptly as practicable following the
date of this Agreement and in consultation with CII, the Company shall call and
give notice of the Company Shareholders' Meeting to be held on or prior to May
16, 1998 for the purpose of voting upon this Agreement and the Merger, in each
case in accordance with the terms of the TBCA. Subject to Sections 6.01 and
6.02, the Company will, through its Board of Directors, recommend that its
shareholders approve this Agreement and the Merger.
6.05. Legal Conditions to Merger.
(a) Merger Cooperation. Subject to Section 6.01, CII and
the Company will take all reasonable actions necessary to comply promptly with
all legal requirements which may be imposed on it with respect to the Merger
(which actions shall include, without limitation, furnishing all information
and making all filings required under the HSR Act and in connection with
approvals of or filings with any other Governmental Entity) and will promptly
cooperate with and furnish information to each other in connection with any
such requirements imposed upon either of them or any of their Subsidiaries in
connection with the Merger. Each of CII and the Company will, and will cause
its Subsidiaries to, take all reasonable actions necessary to obtain (and will
cooperate with each other in obtaining) any consent, authorization, order or
approval of, or any exemption by, any Governmental Entity or other third party,
required to be obtained or made by CII, the Company or any of their
Subsidiaries in connection with the Merger or the taking of any action
contemplated thereby or by this Agreement.
(b) Financing Cooperation. The Company shall, and shall
cause its Subsidiaries and its and their respective officers, employees and
advisors to, provide all reasonable cooperation in connection with the
arrangement of any financing to be consummated contemporaneous with or after
the Closing in respect of the transactions contemplated by this Agreement,
including without limitation, (i) participation in meetings, due diligence
sessions and road shows, (ii) the preparation of offering memoranda, private
placement memoranda, prospectuses and similar documents, and (iii)
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the execution and delivery of any commitment letters, underwriting or placement
agreements, pledge and security documents, other definitive financing documents
or other requested certificates or documents, including a certificate of the
chief financial officer of the Company with respect to solvency matters,
comfort letters of accountants and legal opinions as may be reasonably
requested by CII.
6.06. Confidentiality. The parties shall, and shall cause their
affiliates to, keep this Agreement and its terms, and the existence of the
transactions contemplated hereby, confidential, except that after the
distribution of the Proxy Statement either party may make such disclosure as it
reasonably considers is appropriate after receiving the prior written consent
of the other party (which consent shall not be unreasonably withheld or
delayed) and after consulting with the other party concerning the substance of
such disclosure. If the transactions contemplated by this Agreement are not
consummated for any reason whatsoever, CII shall not, from and after such
termination, disclose or use any confidential information it may have
concerning the affairs of the Company, except for information which is required
by law to be disclosed or as may be disclosed in any preliminary Offering
Memorandum distributed prior to such termination (in which case CII shall
notify the Company as promptly as practical of its obligation to make such
disclosure and shall cooperate with all reasonable requests by the Company to
prevent or limit such disclosure). Confidential information includes, but is
not limited to, customer lists and files, prices and costs, business and
financial records, surveys, reports, plans, proposals, financial information,
information relating to personnel and personnel contracts, stock ownership,
liabilities and litigation.
6.07. Consents. Each of CII and the Company shall use all reasonable
efforts to obtain all necessary consents, waivers and approvals under any of
CII's or the Company's material agreements, contracts, licenses or leases in
connection with the Merger.
6.08. Brokers or Finders. Each of CII and the Company represents, as
to itself, its Subsidiaries and its Affiliates, that no agent, broker,
investment banker, financial advisor or other firm or person is or will be
entitled to any broker's or finder's fee or any other commission or similar fee
in connection with any of the transactions contemplated by this Agreement
except (a) Bear ▇▇▇▇▇▇▇, whose fees and expenses will be paid by the Company in
accordance with the Company's agreement with such firm (a copy of which has
been delivered by the Company to CII prior to the date of this Agreement) and
(b) ▇▇▇▇▇, Muse & Co. Partners, L.P., or another affiliate of HMRB ("HMC
Partners"), which will be paid a fee at the Closing pursuant to the HM
Financial Advisory Agreement (as hereinafter defined). True and complete copies
of all agreements and understandings between the Company or any of its
affiliates and Bear ▇▇▇▇▇▇▇ relating to the transactions contemplated hereby
have been delivered to CII (the "Bear ▇▇▇▇▇▇▇ Agreement").
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6.09. Indemnification. In the event of any threatened or actual
claim, action, suit, proceeding or investigation, whether civil, criminal or
administrative, including, without limitation, any such claim, action, suit,
proceeding or investigation in which any of the present or former officers or
directors (in their capacities as such, and not in any other capacity,
including as a shareholder or former shareholder of the Company) (the
"Managers") of the Company or any of its Subsidiaries is, or is threatened to
be, made a party by reason of the fact that he is or was a director, officer,
employee or agent of the Company or any of its Subsidiaries, or is or was
serving at the request of the Company or any of its Subsidiaries as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, whether before or after the Effective Time, the
Company (prior to the Effective Time) and the Surviving Corporation (from and
after the Effective Time) shall indemnify and hold harmless to the full extent
permitted by applicable law (including by advancing expenses promptly as
statements therefor are received), each such Manager against any losses,
claims, damages, liabilities, costs, expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement in connection with any such
claim, action, suit, proceeding or investigation, and in the event of any such
claim, action, suit proceeding or investigation (whether arising before or
after the Effective Time), (i) if the Company (prior to the Effective Time) or
the Surviving Corporation (from and after the Effective Time) has not promptly
assumed the defense of such matter, the Managers may retain counsel
satisfactory to them and the Company (prior to the Effective Time) or the
Surviving Corporation (from and after the Effective Time) shall pay all fees
and expenses of such counsel promptly as statements therefor are received and
(ii) the Company (prior to the Effective Time) or the Surviving Corporation
(from and after the Effective Time) will use reasonable efforts to assist in
the vigorous defense of any such matter; and provided further that the Company
and the Surviving Corporation shall have no obligation under the foregoing
provisions of this Section to any Manager when and if a court of competent
jurisdiction shall ultimately determine, and such determination shall have
become final and non-appealable, (x) that indemnification of such Manager in
the manner contemplated hereby is prohibited by applicable law or (y) that the
Company has breached a representation or warranty hereunder with respect to the
same matters for which indemnification is being sought by such Manager and that
such Manager had actual knowledge of such breach at the Effective Time. Any
Manager wishing to claim indemnification under this Section, upon learning of
any such claim, action, suit, proceeding or investigation, shall notify the
Company (prior to the Effective Time) and the Surviving Corporation (from and
after the Effective Time) thereof in writing (provided that the failure to give
such notice shall not affect any obligations hereunder, except to the extent
that the indemnifying
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party is actually and materially prejudiced thereby). The indemnified parties
as a group may retain only one law firm to represent them with respect to each
matter unless there is, under applicable standards of professional conduct, a
conflict of any significant issues between the positions of two or more
indemnified parties. CII and the Company agree that all rights to
indemnification existing in favor of the Managers as provided in the Company's
Articles of Incorporation or Bylaws as in effect as of the date hereof and as
of the Effective Time, and in any agreement between the Company and any Manager
with respect to matters occurring prior to the Effective Time, shall survive
the Merger for a period of six years after the Effective Time. For a period of
six years after the Effective Time, except as expressly contemplated by Section
1.05 hereof, the Surviving Corporation shall not amend or repeal any provisions
of the Articles of Incorporation or Bylaws of the Company (which shall continue
as the Articles of Incorporation and Bylaws of the Surviving Corporation after
the Effective Time) in any manner which would adversely affect the
indemnification or exculpatory provisions contained therein (as such are
applicable to the indemnified parties).
6.10. Protected Employees. If the employment with the Company of any
individual listed in Schedule 6.10 is terminated by the Board of Directors of
the Surviving Corporation, over the objection of the Chief Executive Officer of
the Surviving Corporation, during the 12-month period from and after the
Effective Time for any reason other than for "Cause," such employee's salary
and benefits shall be continued for the 12-month period commencing as of the
date of termination. As used herein, "Cause" shall mean (a) the failure or
inability for any reason of the employee to devote his full business time to
the Company's business, (b) the failure of the employee to diligently or
effectively perform his duties to the Company, (c) the commission by the
employee of any act involving moral turpitude or the commission by the employee
of any act or the suffering by the employee of any occurrence or state of
facts, which renders the employee incapable of performing his duties to the
Company, or adversely affects or could reasonably by expected to adversely
affect the Company's business reputation, (d) the violation by the employee of
instructions or policies established by the Company with respect to the
operation of its business and affairs or the employee's failure to carry out
the reasonable instructions of the President of the Company, or (e) the
commission by the employee of any action or the existence of any state of facts
which would legally justify an employer in terminating an employee. For the
purpose of this provision, a material change in duties (provided such employee
provides the Company with 30 days prior notice and the Company has not cured
such material change prior to the expiration of such 30 days) or a reduction in
salary of more than 25% after the Effective Time, in either case without the
consent of the employee, shall be considered a termination of employment.
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6.11. Additional Agreements; Reasonable Efforts. Subject to the
terms and conditions of this Agreement, each of the parties agrees to use all
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement, subject to the appropriate vote of shareholders
of the Company described in Section 6.04, including cooperating fully with the
other party. In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement or to vest
the Surviving Corporation with full title to all properties, assets, rights,
approvals, immunities and franchises of either of the Constituent Corporations,
the proper officers and directors of each party to this Agreement shall take
all such necessary action.
6.12. Disclosure Statement. From time to time prior to the Effective
Time, the Company will promptly, and in any event within five business days,
supplement and amend the Company Disclosure Schedule delivered in connection
herewith with respect to any matter which, if existing, occurring or known at
the date of this Agreement, would have been required to be set forth or
described in the Company Disclosure Schedule or which is necessary to correct
any information in the Company Disclosure Schedule which has been rendered
inaccurate thereby. No supplement or amendment shall have any effect for the
purpose of determining satisfaction of the conditions set forth in Article VII
or compliance by the Company with the covenants set forth in Articles V and VI.
6.13. Financial Statements. The Company shall deliver to CII
promptly upon their becoming available (in no event later than 30 days from the
end of such month or period, as the case may be), copies of monthly financial
statements for each of the months ended after the date hereof and prior to the
Closing and quarterly financial statements for the quarter ended March 31,
1998. Each of such monthly and quarterly financial statements shall be prepared
in accordance with GAAP (except for the exclusion of notes), applied throughout
the periods involved and present fairly the financial condition of the Company
and its Subsidiaries as at said dates (subject to normal year end adjustments).
6.14. Opinion of Financial Advisor. Prior to the date hereof, Bear
▇▇▇▇▇▇▇ has given its oral opinion to the Company's Board of Directors that the
Merger Consideration to be received by the Company's shareholders is fair, from
a financial point of view, to the shareholders of the Company. Upon receipt,
the Company will deliver to CII the written opinion of Bear ▇▇▇▇▇▇▇ to the same
effect.
6.15. Shareholders Agreement. The Company shall execute and deliver,
and the Company and CII shall use their reasonable efforts to cause each of the
individuals and entities listed in
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Schedule 6.15 to execute and deliver, a Shareholders Agreement in the form of
Exhibit E simultaneously with the Closing.
6.16. Employment and Consulting Agreements.
(a) The Company shall, and shall use its reasonable
efforts to cause each of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ to, execute and deliver an Employment
Agreement in the forms of Exhibit F simultaneously with the Closing.
(b) The Company shall, and shall use its reasonable
efforts to cause ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ to, execute and deliver a Consulting
Agreement in the form of Exhibit G simultaneously with the Closing.
6.17. Stock Option Plans. Prior to or simultaneously with the
Closing, the Company shall adopt Stock Option Plans or other arrangements (a)
for the benefit of the Company's employees, in the form of Exhibit H and (b)
for the benefit of the Company's unit managers and branch managers,
substantially on the terms set forth in Exhibit I. Under the Stock Option Plan
to be adopted for the benefit of the Company's employees, options for 338,481
shares of Company Common Stock shall be granted to each of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
▇▇. and ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and options for an aggregate of 338,481
shares of Company Common Stock shall be granted to existing members of
management of the Company.
6.18. Copyright Assignment and License Agreement. Prior to or
simultaneously with the Closing, the Company and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall enter
into a Copyright Assignment and a License Agreement substantially in the form
of Exhibit J and Exhibit K, respectively.
6.19. Personal Property Lease. Prior to or simultaneously with the
Closing, the Company and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall have the right to enter into a
Personal Property Lease in the form of Exhibit L.
6.20. Company Expenses. The Company has directed each of its
advisors (including its attorneys, accountants, investment bankers, consultants
and other advisors) to ▇▇▇▇ the Company for all fees and expenses incurred for
or on behalf of the Company by such advisors in connection with the
transactions contemplated hereby (the "Third Party Expenses") no less
frequently than monthly or, in the case of the fees and expenses payable to
Bear ▇▇▇▇▇▇▇, at the times and in the amounts specified in the Bear ▇▇▇▇▇▇▇
Agreement, and to provide a final invoice to the Company for all unpaid Third
Party Expenses at least two business days prior to the Closing. The Company
will pay all such invoices promptly following receipt thereof.
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6.21. Environmental Investigation. The Company shall cooperate in
all reasonable respects with CII in identifying and evaluating the
environmental condition of any real property formerly owned, operated or leased
by the Company or any Subsidiary, including any Subsidiary of the Company
divested by the Company on or before January 1, 1995 and which property is
currently not owned, operated or leased by the Company or its Subsidiaries
("Former Properties"). Such cooperation shall include, but shall not be
limited to, to the extent reasonably possible without the expenditure of any
unusual effort or expense, (i) identifying the location of all Former
Properties, which location shall include the appropriate street address and zip
code, (ii) providing information on the historic use of each of the Former
Properties, particularly the use while under the control of the Company or any
of its Subsidiaries, (iii) identifying any environmentally sensitive operations
at each Former Property, including, but not limited to, hazardous materials
usage, waste disposal practices and underground storage tanks, (iv) providing
copies of any indemnification agreements or environmental reports associated
with or prepared in connection with the Former Properties that are in the
Company's possession, and (v) making available employees, consultants and
advisors to the Company who are familiar with the Former Properties.
6.22. Certain Agreements with HMC Partners. Prior to or
simultaneously with the Closing, the Company shall, and shall cause each of its
Subsidiaries to, enter into a Financial Advisory Agreement with HMC Partners in
the form of Exhibit O (the "HM Financial Advisory Agreement") and a Monitoring
and Oversight Agreement with HMC Partners in the form of Exhibit P (the "HM
Monitoring Agreement").
ARTICLE VII
CONDITIONS TO MERGER
7.01. Conditions to Each Party's Obligation To Effect the Merger.
The respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction prior to the Closing Date of the following
conditions:
(a) Shareholder Approval. This Agreement and the Merger
shall have been approved and adopted by the affirmative vote of the holders of
two-thirds of the outstanding shares of the Company Common Stock.
(b) HSR. The waiting period under the HSR Act shall have
expired or each of the Company and CII shall have received notice of early
termination of such waiting period.
(c) No Injunctions or Restraints; Illegality. No
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other
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legal or regulatory restraint or prohibition preventing the consummation of the
Merger shall have been issued, nor shall any proceeding brought by a domestic
administrative agency or commission or other domestic Governmental Entity
seeking any of the foregoing be pending; nor shall there be any action taken,
or any statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger which makes the consummation of the Merger illegal.
7.02. Additional Conditions to Obligations of CII. The obligations
of CII to effect the Merger are subject to the satisfaction of each of the
following conditions, any of which may be waived, in writing, exclusively by
CII:
(a) Representations and Warranties. The representations
and warranties of the Company set forth in this Agreement shall be true and
correct as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date, except for changes
contemplated by this Agreement or, in the case of representations and
warranties that are not already qualified by materiality or Material Adverse
Effect, changes or inaccuracies that do not constitute a Material Adverse
Effect; and CII shall have received a certificate signed on behalf of the
Company by the chief executive officer and the chief financial officer of the
Company to such effect.
(b) Performance of Obligations of the Company. The
Company shall have performed in all material respects all obligations required
to be performed by it under this Agreement at or prior to the Closing Date; and
CII shall have received a certificate signed on behalf of the Company by the
chief executive officer and the chief financial officer of the Company to such
effect.
(c) Opinion of the Company's Counsel. CII shall have
received from Gardere & ▇▇▇▇▇, L.L.P., counsel to the Company, an opinion in
the form of Exhibit M, with such changes thereto as may be reasonably requested
by CII and its counsel.
(d) Material Adverse Effect. There shall not have
occurred any change in the business, results of operations or financial
condition of the Company and its Subsidiaries at any time between the date
hereof and the Effective Time which constitute a Material Adverse Effect.
(e) Necessary Funds. The Company and CII shall have
received the funds pursuant to the Commitment Letters or from substitute
sources in the same aggregate amount and on terms not substantially less
favorable than those set forth in the Commitment Letters.
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(f) Cash Assets. After giving effect to the Merger and
payment of the Merger Consideration, the Third Party Expenses and all other
fees and expenses incurred or to be incurred by the Company in connection with
the transactions contemplated hereby (other than those related to the HM
Financial Advisory Agreement, the HM Monitoring Agreement and the financing of
the Merger Consideration), the Company and its Subsidiaries shall have
immediately prior to the Closing (i) "Cash and Cash Equivalents" in an amount
equal to at least $10,000,000, as certified to CII by the Company's Chief
Executive Officer. As used herein, Cash and Cash Equivalents shall include (i)
the items included in the Company Balance Sheet as cash and cash equivalents
and (ii) if as of the Closing Date that certain King Air B200 aircraft has not
been sold or that certain grid promissory note which had a maximum principal
amount outstanding of $820,835.73, payable to the Company by All-Star
Helicopters, Inc., has not been paid in full, an amount equal to $2,086,000
(provided that if such aircraft has been sold or such note has been paid, the
amount otherwise included pursuant to this clause (ii) shall be reduced by the
actual cash received by the Company in connection therewith).
(g) Environmental Investigation of Prior Owned
Properties. CII shall have completed its due diligence investigation of the
Former Properties and based thereon shall not have reasonably concluded that
there are environmental liabilities relating to such properties that constitute
a Material Adverse Effect.
(h) Employment and Consulting Agreements. The Company and
each of the individuals listed in Section 6.16 shall have executed and
delivered to CII the Employment and Consulting Agreements required thereby.
7.03. Additional Conditions to Obligations of the Company. The
obligation of the Company to effect the Merger is subject to the satisfaction
of each of the following conditions, any of which may be waived, in writing,
exclusively by the Company:
(a) Representations and Warranties. The representations
and warranties of CII set forth in this Agreement shall be true and correct in
all material respects as of the date of this Agreement and (except to the
extent such representations and warranties speak as of an earlier date) as of
the Closing Date as though made on and as of the Closing Date, except for
changes contemplated by this Agreement; and the Company shall have received a
certificate signed on behalf of CII by the chief executive officer and the
chief financial officer of CII to such effect.
(b) Performance of Obligations of CII. CII shall have
performed in all material respects all obligations required to be performed by
them under this Agreement at or prior to the Closing Date, and the Company
shall have received a certificate signed on behalf of CII by the chief
executive officer and the chief financial officer of CII to such effect.
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(c) Opinion of CII's Counsel. The Company shall have
received from Weil, Gotshal & ▇▇▇▇▇▇ LLP, counsel to CII, an opinion in the
form of Exhibit N, with such changes thereto as may be reasonably requested by
the Company and its counsel.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.01. Termination. This Agreement may be terminated at any time
prior to the Effective Time, by written notice by the terminating party to the
other party, whether before or after approval of the matters presented in
connection with the Merger by the shareholders of the Company:
(a) by mutual written consent of CII and the Company; or
(b) by either CII or the Company if the Merger shall not
have been consummated by June 5, 1998; provided, however, that (i) if the
condition set forth in Section 7.02(f) has not been satisfied by June 5, 1998,
CII shall have the right to extend the closing date until the third business
day after the earliest date that such condition has been satisfied, but in no
event later than June 30, 1998 and (ii) the right to terminate this Agreement
under this Section 8.01(b) shall not be available to a party whose failure to
fulfill any obligation under this Agreement has been the cause of or resulted
in the failure of the Merger to occur on or before such date;
(c) by either CII or the Company if a court of competent
jurisdiction or other Governmental Entity shall have issued a nonappealable
final order, decree or ruling or taken any other action, in each case having
the effect of permanently restraining, enjoining or otherwise prohibiting the
Merger;
(d) by either the Company or CII, if, at the Company
Shareholders' Meeting (including any adjournment or postponement thereof), the
requisite vote of the shareholders of the Company in favor of this Agreement
and the Merger shall not have been obtained;
(e) by CII, (i) if the Board of Directors of the Company
shall (A) fail to call, give notice of, convene or hold the Company
Shareholders' Meeting, (B) fail to recommend to the Company's shareholders
approval of the transactions contemplated by this Agreement, or (C) have
withdrawn or modified its recommendation of this Agreement or the Merger in a
manner adverse to CII or shall have resolved to do either of the foregoing or
(ii) an Acquisition Proposal has been recommended by the Board of Directors of
the Company or accepted by the Company or the Company shall have entered into
an agreement with respect to such Acquisition Proposal;
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(f) by the Company if (i) the Board of Directors of the
Company shall have withdrawn or modified its recommendation of this Agreement
in a manner adverse to CII or shall have resolved to do either of the foregoing
in accordance with Section 6.01 or Section 6.02 hereof or (ii) an Acquisition
Proposal has been recommended by the Board of Directors of the Company or
accepted by the Company or the Company shall have entered into an agreement
with respect to such Acquisition Proposal in accordance with Section 6.01;
provided, however, that in either case CII receives at least five business
days' prior written notice and, during such five business day period, the
Company shall, and shall cause its financial and legal advisors to, consider
any adjustment in the terms and conditions of this Agreement that CII may
propose; provided, further, that the Company may not effect such termination
pursuant to this Section 8.01(f) unless the Company has contemporaneously with
such termination tendered payment to CII or CII's designee of the amounts that
are due to CII under Section 8.03(b); or
(g) by CII or the Company, if there has been a breach of
any representation, warranty, covenant or agreement on the part of the other
party set forth in this Agreement, which breach constitutes a Material Adverse
Effect and shall not have been cured within 10 business days following receipt
by the breaching party of written notice of such breach from the other party
(provided that such right to cure shall not affect either party's right to
terminate this Agreement pursuant to Section 8.01(b)).
8.02. Effect of Termination. In the event of termination of this
Agreement as provided in Section 8.01, this Agreement shall immediately become
void and, subject to Section 8.03 and the provisions of this Section 8.02,
there shall be no liability or obligation on the part of CII, the Company or
their respective officers, directors or shareholders (provided that this
Section 8.02 and Sections 6.06, 6.08 and 8.03 shall survive any such
termination in accordance with their respective terms); provided, however, that
the foregoing shall not relieve CII from any liability that it may have to the
Company as a result of the willful breach by CII of any of its covenants,
agreements, representations or warranties contained in this Agreement.
8.03. Fees and Expenses.
(a) Whether or not the Merger is consummated, except as
otherwise provided in Section 8.03(b), all fees and expenses incurred by the
Company in connection with this Agreement and the transactions contemplated
hereby shall be paid by the Company, except that all fees and expenses incurred
by CII or its affiliates shall be paid by CII or its affiliates.
(b) If (i) the Company or CII terminates this Agreement
pursuant to Section 8.01(d) and one or more of the individuals set
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forth on Exhibit A shall have breached any of his, her or its obligations under
the Voting Agreement, (ii) CII terminates this Agreement pursuant to Section
8.01(e), (iii) the Company terminates this Agreement pursuant to Section
8.01(f) or (iv) CII terminates this Agreement pursuant to Section 8.01(g) as a
result of a willful breach of a representation, warranty, covenant or agreement
by the Company, then in any such event the Company shall reimburse CII or its
designee for its and its affiliates' documented reasonable out-of-pocket fees
and expenses incurred in connection with the transactions contemplated hereby,
promptly upon presentment of statements documenting such expenses, in any event
not to exceed an aggregate of $2,000,000. Payment of such amounts shall
constitute complete and full satisfaction of all of the Company's and its
affiliates' obligations and liabilities to CII under this Agreement related to
such termination or otherwise.
8.04. Amendment. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors,
at any time before or after approval of the matters presented in connection
with the Merger by the shareholders of the Company, but, after such approval,
no amendment shall be made which by law requires further approval by such
shareholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
8.05. Extension; Waiver. At any time prior to the Effective Time,
the parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other party hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement of a
party hereto to any such extension or waiver shall be valid only if set forth
in a written instrument signed on behalf of such party.
ARTICLE IX
MISCELLANEOUS
9.01. Investigations; Nonsurvival of Representations and Warranties.
The respective representations and warranties of the Company and CII contained
herein shall not be deemed waived or otherwise affected by any investigation
made by a party hereto. The representations and warranties of the Company and
CII set forth in Articles III and IV of this Agreement shall terminate at, and
shall not survive, the Effective Time. The Confidentiality Agreement shall
survive the execution and delivery of this Agreement.
9.02. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if
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delivered personally, telecopied (which is confirmed), or mailed by registered
or certified mail (return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to CII, to:
▇/▇ ▇▇▇▇ Operating, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Telecopy Number: 214/740-7313
with a required copy to (which shall not constitute notice):
Weil, Gotshal & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇
Telecopy Number: 214/746-7777
(b) if to the Company, to
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Telecopy Number: 972/386-1008
with a required copy to (which shall not constitute notice):
Gardere & ▇▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopy Number: 214/999-3683
9.03. Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement they shall be deemed to be
followed by the words "without limitation." The term "or" is disjunctive but
not necessarily exclusive. The phrase "made available" in this Agreement shall
mean that the information referred to has been made available if requested by
the party to whom such information is to be made available. The phrases "the
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date of this Agreement," "the date hereof" and terms of similar import, unless
the context otherwise requires, shall be deemed to refer to the date set forth
in the first paragraph of this Agreement.
9.04. Counterparts. This Agreement may be executed in counterparts,
all of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the parties and
delivered to the other parties, it being understood that all parties need not
sign the same counterparts.
9.05. Entire Agreement; No Third Party Beneficiaries. This Agreement
(including the documents and the instruments referred to herein) (a)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and (b) except as provided in Sections 6.09, 6.10 and
9.08(which such Sections are intended to be for the benefit of, and to be
relied upon by, the third parties described therein), are not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder.
9.06. Governing Law. THE PARTIES ACKNOWLEDGE AND AGREE THAT THIS
AGREEMENT AND THE OBLIGATIONS AND UNDERTAKINGS OF THE PARTIES HEREUNDER SHALL
BE PERFORMABLE IN DALLAS, DALLAS COUNTY, TEXAS. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS
WITHOUT REGARD TO ANY APPLICABLE CONFLICTS OF LAW.
9.07. Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws, such provision
shall be fully severable and this Agreement shall be construed and enforced as
if such illegal, invalid or unenforceable provision never comprised a part
hereof; and the remaining provisions hereof shall remain in full force and
effect and shall not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom. Furthermore, in lieu of such illegal,
invalid or unenforceable provision, there shall be added automatically as part
of this Agreement, a provision as similar in its terms to such illegal, invalid
or unenforceable provision as may be possible and be legal, valid and
enforceable.
9.08. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties; provided that CII may make a collateral
assignment of its interests hereunder to any lender to CII without the prior
written consent of the Company. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by
the parties and their respective successors.
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9.09. Knowledge. As used in this Agreement, the term "to the
knowledge of the Company," or words of similar import, shall mean the actual
current conscious awareness of the Company's Chairman of the Board, Chief
Executive Officer, President, Executive Vice President of Sales and Marketing,
Chief Financial Officer and General Counsel.
9.10. Withholding Taxes. Each of the shareholders of the Company
shall provide to CII at the time of the Merger, to the extent applicable, an
affidavit which complies with Section 1445(b)(2) of the Code and the Treasury
Regulations thereunder.
[THE NEXT FOLLOWING PAGE IS THE SIGNATURE PAGE]
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IN WITNESS WHEREOF, CII and the Company have caused this Agreement to
be signed by their respective officers thereunto duly authorized as of the date
first written above.
▇▇▇▇▇▇▇ INVESTMENTS, INC.
By:
--------------------------------
Its:
----------------------------
HOME INTERIORS & GIFTS, INC.
By:
--------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chairman of the Board
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